- Net income of $31.3 million ($0.94 per
diluted share), adjusted net income of $35.2 million ($1.06 per
diluted share).
- Combined ratio of 81.3%, combined ratio
before the impact of the LPT of 83.0%.
- The Board declared an increased
quarterly dividend of $0.20 per share and authorized a new $50.0
million share repurchase program.
Employers Holdings, Inc. (“EHI” or the “Company”)
(NYSE:EIG) today reported the following for the fourth quarter
of 2017: (i) net income of $31.3 million ($0.94 per diluted share);
(ii) net income excluding the impact of the LPT of $28.2 million
($0.85 per diluted share); and (iii) adjusted net income of $35.2
million ($1.06 per diluted share).
The Company also reported that the Board of Directors declared a
first quarter 2018 dividend and authorized a new $50.0 million
share repurchase program. The first quarter dividend, which was
increased to $0.20 per share, will be paid on March 21, 2018
to stockholders of record on March 7, 2018. The new share
repurchase authorization, which replaces an expiring program with a
remaining authorization of $28.9 million, will expire on February
26, 2020.
The Company's adjusted net income for the fourth quarter of 2017
increased $3.9 million year-over-year. This increase reflects
strong underwriting results highlighted by an 83.0% combined ratio
before the impact of the LPT and a 6% increase in net earned
premiums.
The Company's net income and net income before the impact of the
LPT for the fourth quarter of 2017 decreased by $4.2 million and
$4.4 million, respectively, year-over-year. The decreases were the
result of a non-recurring income tax expense of $7.0 million in
connection with U.S. corporate tax reform enacted in December. This
incremental income tax expense represents the impact of
re-measurement of the Company’s deferred tax assets and liabilities
using the new U.S. statutory tax rate.
The Company’s book value per share of $29.07, book value per
share including the Deferred Gain of $34.09 and adjusted book value
per share of $30.80, increased 13.4%, 9.7% and 7.2% for the year,
respectively, each computed after taking into account dividends
declared during 2017.
Chief Executive Officer Douglas D. Dirks commented on the
results: “The fourth quarter marked a strong end to a successful
year for EMPLOYERS. During the fourth quarter we grew written
premiums by 8% year-over-year, lowered our current and prior year
loss reserve provisions and increased the quarterly dividend by
33.3%.
In addition, we have recently initiated a plan of aggressive
development and implementation of new technologies and capabilities
that we believe will fundamentally transform and enhance the
digital experience of our customers. We have chosen to reinvest the
expected financial benefits from corporate income tax reform back
into our business over the next several years by greatly
accelerating the development and deployment of these new digital
capabilities. We believe that these new technological and
intellectual capabilities will support our future growth
initiatives, provide us with greater pricing precision and
flexibility and promote long-term value creation.
We expect that the development and implementation of these new
technologies and capabilities will increase our underwriting and
other operating expense ratio by approximately four percentage
points in 2018 and two percentage points in 2019, as compared to
that experienced in 2017. However, we expect that these increased
expenses will be offset by operational efficiency gains in future
periods.”
Summary of Fourth Quarter 2017
Results
(All comparisons vs. fourth quarter 2016, unless noted
otherwise).
Net earned premiums of $181.6 million increased $9.6 million due
primarily to new business writings and increases in final audit
premiums, partially offset by declines in renewal business
premium.
The loss ratio before the impact of the LPT of 48.6% decreased
5.4 percentage points reflecting the continued impacts of key
business initiatives including: an emphasis on settling open
claims; diversifying our risk exposure across geographic markets;
and leveraging data-driven strategies to target, underwrite and
price profitable classes of business across all of our markets.
The commission expense ratio of 13.6% increased 2.0 percentage
points due mainly to increases in agency incentives and in the
amount of business produced by our partnerships and alliances.
The underwriting and other operating expense ratio of 20.8%
increased 0.7 percentage points due mainly to increases in fourth
quarter professional fees and incentive accruals.
Net investment income of $19.1 million was unchanged.
Stockholders’ Equity including the
Deferred Gain
Stockholders’ equity including the Deferred Gain was $1,111.3
million, an increase of 9.4% from December 31, 2016.
Conference Call and Webcast, Reports
Filed With The Securities and Exchange Commission (the "SEC") and
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 "non-GAAP financial measures." 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.
The Company will host a conference call on Thursday,
February 22, 2018, at 8:30 a.m. Pacific Standard 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
5177907.
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 its filings with the Securities and Exchange Commission
and its 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, claim
trends and the impact of key business initiatives, future
technologies and planned investments. 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).
Copyright © 2018 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.
Employers Holdings, Inc.
Fourth Quarter And Full Year 2017 Financial Supplement
EMPLOYERS HOLDINGS, INC.
Table of Contents
Page
1
Consolidated Financial Highlights
2 Summary Consolidated Balance Sheets
3 Summary Consolidated Income Statements
4 Return on Equity
5 Combined Ratios
6
Roll-forward of Unpaid Losses and LAE
7
Consolidated Investment Portfolio
8 Book
Value Per Share
9 Earnings Per Share
10 Non-GAAP Financial Measures
EMPLOYERS HOLDINGS, INC.
Consolidated Financial Highlights
(unaudited)
$ in millions, except per share
amounts
Three Months Ended Years
Ended December 31, December 31, 2017
2016 % change 2017 2016
% change Selected financial highlights: Gross
insurance premiums written $ 168.4 $ 155.7 8 % $ 729.7 $ 701.4 4 %
Net insurance premiums written 167.0 154.2 8 723.7 694.6 4 Net
insurance premiums earned 181.6 172.0 6 716.5 694.8 3 Net
investment income 19.1 19.1 — 74.6 73.2 2 Underwriting income(1)
33.9 27.6 23 68.0 57.3 19 Net income before impact of the LPT(1)
28.2 32.6 (13 ) 89.6 90.1 (1 ) Adjusted net income(1) 35.2 31.3 12
95.5 83.0 15 Net income 31.3 35.5 (12 ) 101.2 106.7 (5 )
Comprehensive income 30.4 (7.6 )
n/m
116.3 97.6 19 Total assets 3,840.1 3,773.4 2 Stockholders' equity
947.7 840.6 13 Stockholders' equity including the Deferred Gain(2)
1,111.3 1,015.5 9 Adjusted stockholders' equity(2) 1,003.9 941.0 7
Annualized adjusted return on stockholders' equity(3) 14.1 % 13.5 %
4 % 9.8 % 9.2 % 7
Amounts per share: Cash dividends declared
per share $ 0.15 $ 0.09 67 % $ 0.60 $ 0.36 67 % Earnings per
diluted share(4) 0.94 1.08 (13 ) 3.06 3.24 (6 ) Earnings per
diluted share before impact of the LPT(4) 0.85 0.99 (14 ) 2.71 2.73
(1 ) Adjusted earnings per diluted share(4) 1.06 0.95 12 2.89 2.52
15 Book value per share(2) 29.07 26.16 11 Book value per share
including the Deferred Gain(2) 34.09 31.61 8 Adjusted book value
per share(2) 30.80 29.29 5
Combined ratio before impact of the
LPT:(5) Loss and loss adjustment expense ratio: Current
year 58.5 % 63.8 % 62.4 % 65.2 % Prior year (9.9 ) (9.8 ) (2.6 )
(2.7 ) Loss and loss adjustment expense ratio 48.6 % 54.0 % 59.8 %
62.5 % Commission expense ratio 13.6 11.6 12.8 12.0 Underwriting
and other operating expense ratio 20.8 20.1 19.5
19.7 Combined ratio before impact of the LPT 83.0 %
85.6 % 92.1 % 94.1 % (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.
EMPLOYERS HOLDINGS, INC.
Summary Consolidated Balance Sheets
(unaudited)
$ in millions, except per share
amounts
December 31, 2017 December 31,
2016 ASSETS Investments, cash and cash equivalents $
2,752.0 $ 2,623.4 Accrued investment income 19.6 20.6 Premiums
receivable, net 326.7 304.7 Reinsurance recoverable on paid and
unpaid losses 544.2 588.7 Deferred policy acquisition costs 45.8
44.3 Deferred income taxes, net 28.7 59.4 Contingent commission
receivable—LPT Agreement 31.4 31.1 Other assets 91.7 101.2
Total assets $ 3,840.1 $ 3,773.4
LIABILITIES Unpaid losses and LAE $ 2,266.1 $ 2,301.0
Unearned premiums 318.3 310.3 Commissions and premium taxes payable
55.3 48.8 Deferred Gain 163.6 174.9 Notes payable 20.0 32.0 Other
liabilities 69.1 65.8 Total liabilities $ 2,892.4 $
2,932.8
STOCKHOLDERS' EQUITY Common stock and
additional paid-in capital $ 381.8 $ 372.6 Retained earnings 842.2
777.2 Accumulated other comprehensive income, net 107.4 74.5
Treasury stock, at cost (383.7 ) (383.7 ) Total stockholders’
equity 947.7 840.6 Total liabilities and
stockholders’ equity $ 3,840.1 $ 3,773.4
Stockholders' equity including the
Deferred Gain (1) $ 1,111.3 $ 1,015.5 Adjusted stockholders' equity
(1) 1,003.9 941.0 Book value per share
(1) $ 29.07 $ 26.16 Book value per share including the Deferred
Gain (1) 34.09 31.61 Adjusted book value per share (1) 30.80
29.29 (1) See Page 8 for calculations
and Page 10 for information regarding our use of Non-GAAP Financial
Measures.
EMPLOYERS HOLDINGS, INC.
Summary Consolidated Income Statements
(unaudited)
$ in millions, except per share
amounts
Three Months Ended Years Ended December
31, December 31, 2017 2016
2017 2016 Underwriting revenues: Gross
premiums written $ 168.4 $ 155.7 $ 729.7 $ 701.4 Premiums ceded
(1.4 ) (1.5 ) (6.0 ) (6.8 ) Net premiums written 167.0 154.2 723.7
694.6 Net premiums earned 181.6 172.0 716.5 694.8
Underwriting
expenses: Losses and LAE incurred (85.2 ) (89.9 ) (417.2 )
(417.9 ) Commission expense (24.7 ) (20.0 ) (91.4 ) (83.5 )
Underwriting and other operating expenses (37.8 ) (34.5 ) (139.9 )
(136.1 )
Underwriting income 33.9 27.6 68.0 57.3 Net
investment income 19.1 19.1 74.6 73.2 Net realized gains on
investments — 2.1 7.4 11.2 Gain on redemption of notes payable — —
2.1 — Other income 0.3 — 0.8 0.6 Interest expense (0.3 ) (0.4 )
(1.4 ) (1.6 ) Other expenses — — (7.5 ) — Income tax expense (21.7
) (12.9 ) (42.8 ) (34.0 )
Net income 31.3 35.5 101.2 106.7
Net unrealized (losses) gains on investments arising during the
period, net of tax (0.9 ) (41.7 ) 19.9 (1.8 ) Reclassification
adjustment for net realized gains in net income, net of tax —
(1.4 ) (4.8 ) (7.3 )
Comprehensive income (loss) $
30.4 $ (7.6 ) $ 116.3 $ 97.6
Net income $ 31.3 $ 35.5 $ 101.2 $ 106.7 Amortization of the
Deferred Gain - losses (2.3 ) (2.4 ) (9.3 ) (9.7 ) Amortization of
the Deferred Gain - contingent commission (0.5 ) (0.5 ) (2.0 ) (2.0
) LPT reserve adjustment — — — (3.1 ) LPT contingent commission
adjustments (0.3 ) — (0.3 ) (1.8 )
Net income before
impact of the LPT Agreement (1) $ 28.2 $ 32.6 $ 89.6 $
90.1 Net realized gains on investments — (2.1 ) (7.4 ) (11.2 ) Gain
on redemption of notes payable — — (2.1 ) — Write-off of previously
capitalized costs — — 7.5 — Amortization of intangibles — 0.1 0.3
0.4 Income tax benefit related to items excluded from Net income —
0.7 0.6 3.7 Net impact of tax reform 7.0 —
7.0 —
Adjusted net income
(1) $ 35.2 $ 31.3 $ 95.5
$ 83.0 (1) See Page 10 regarding our use of
Non-GAAP Financial Measures.
EMPLOYERS HOLDINGS, INC.
Return on Equity (unaudited)
$ in millions, except per share
amount
Three Months Ended Years Ended December
31, December 31, 2017 2016
2017 2016 Net income A $
31.3 $ 35.5 $ 101.2 $ 106.7 Impact of the LPT Agreement (3.1 ) (2.9
) (11.6 ) (16.6 ) Net realized gains on investments — (2.1 ) (7.4 )
(11.2 ) Gain on redemption of notes payable — — (2.1 ) — Write-off
of previously capitalized costs — — 7.5 — Amortization of
intangibles — 0.1 0.3 0.4 Income tax benefit related to items
excluded from Net income — 0.7 0.6 3.7 Net impact of tax reform 7.0
— 7.0 —
Adjusted net
income(1) B $ 35.2 $ 31.3
$ 95.5 $ 83.0 Stockholders'
equity - end of period $ 947.7 $ 840.6 $ 947.7 $ 840.6
Stockholders' equity - beginning of period 917.1 850.1 840.6 760.8
Average stockholders' equity C $ 932.4
$ 845.4 $ 894.2 $ 800.7
Stockholders' equity - end of period $ 947.7 $ 840.6 $ 947.7
$ 840.6 Deferred Gain - end of period 163.6 174.9 163.6 174.9
Accumulated other comprehensive income - end of period (136.0 )
(114.6 ) (136.0 ) (114.6 ) Income tax related to accumulated other
comprehensive income - end of period 28.6 40.1 28.6
40.1 Adjusted stockholders' equity - end of period
1,003.9 941.0 1,003.9 941.0 Adjusted stockholders' equity -
beginning of period 992.9 910.3 941.0 866.7
Average adjusted stockholders' equity(1)
D $ 998.4 $ 925.7 $ 972.5
$ 903.9 Return on stockholders' equity
A /
C 3.4 % 4.2 % 11.3 % 13.3 %
Annualized return on
stockholders' equity 13.4 % 16.8 % Adjusted return on
stockholders' equity(1)
B / D 3.5 % 3.4 % 9.8 % 9.2 %
Annualized adjusted return on stockholders' equity(1)
14.1 % 13.5 % (1)
See Page 10 for information regarding our use of Non-GAAP Financial
Measures.
EMPLOYERS HOLDINGS, INC.
Combined Ratios (unaudited)
$ in millions, except per share
amounts
Three Months Ended Years Ended December
31, December 31, 2017 2016
2017 2016 Net premiums earned
A $ 181.6
$ 172.0 $ 716.5 $ 694.8 Losses and LAE incurred
B 85.2 89.9
417.2 417.9 Amortization of the Deferred Gain - losses 2.3 2.4 9.3
9.7 Amortization of the Deferred Gain - contingent commission 0.5
0.5 2.0 2.0 LPT reserve adjustment — — — 3.1 LPT contingent
commission adjustments 0.3 — 0.3 1.8
Losses and LAE before impact of the LPT (1)
C $ 88.3 $ 92.8
$ 428.8 $ 434.5 Prior year loss reserve development (18.0 ) (16.9 )
(18.5 ) (18.4 ) Losses and LAE before impact of the LPT - current
accident year
D $ 106.3 $ 109.7 $ 447.3
$ 452.9 Commission expense
E $ 24.7 $ 20.0 $ 91.4 $
83.5 Underwriting and other operating expenses
F 37.8
34.5 139.9 136.1
Combined ratio: Loss and LAE ratio
B/A 46.9 % 52.3 %
58.2 % 60.1 % Commission expense ratio
E/A 13.6 11.6 12.8
12.0 Underwriting and other operating expense ratio
F/A 20.8
20.1 19.5 19.7 Combined ratio
81.3 % 84.0 % 90.5 % 91.8 %
Combined ratio
before impact of the LPT: (1) Loss and LAE ratio before
impact of the LPT
C/A 48.6 % 54.0 % 59.8 % 62.5 % Commission
expense ratio
E/A 13.6 11.6 12.8 12.0 Underwriting and other
operating expense ratio
F/A 20.8 20.1 19.5
19.7 Combined ratio before impact of the LPT
83.0 % 85.6 % 92.1 % 94.1 %
Combined ratio
before impact of the LPT: current accident year: (1)
Loss and LAE ratio before impact of the LPT
D/A 58.5 % 63.8
% 62.4 % 65.2 % Commission expense ratio
E/A 13.6 11.6 12.8
12.0 Underwriting and other operating expense ratio
F/A 20.8
20.1 19.5 19.7 Combined ratio before
impact of the LPT: current accident year 93.0 % 95.5
% 94.7 % 96.8 % (1) See Page 10 for
information regarding our use of Non-GAAP Financial Measures.
EMPLOYERS HOLDINGS, INC.
Roll-forward of Unpaid Losses and LAE
(unaudited)
$ in millions
Three Months Ended Years Ended December
31, December 31, 2017 2016
2017 2016 Unpaid losses and LAE at
beginning of period $ 2,298.9 $ 2,330.0 $ 2,301.0 $ 2,347.5
Reinsurance recoverable on unpaid losses and LAE 553.1 591.5
580.0 628.2 Net unpaid losses and LAE at
beginning of period 1,745.8 1,738.5 1,721.0
1,719.3 Losses and LAE incurred: Current year losses 106.3
109.8 447.3 452.9 Prior year losses on voluntary business (17.4 )
(17.0 ) (17.4 ) (17.0 ) Prior year losses on involuntary business
(0.6 ) 0.1 (1.1 ) (1.4 ) Total losses incurred 88.3
92.9 428.8 434.5 Losses and LAE paid: Current
year losses 31.7 35.9 76.9 78.7 Prior year losses 73.3 74.5
343.8 354.1 Total paid losses 105.0
110.4 420.7 432.8 Net unpaid losses and LAE at
end of period 1,729.1 1,721.0 1,729.1 1,721.0 Reinsurance
recoverable on unpaid losses and LAE 537.0 580.0
537.0 580.0 Unpaid losses and LAE at end of period $
2,266.1 $ 2,301.0 $ 2,266.1 $ 2,301.0
EMPLOYERS HOLDINGS, INC.
Consolidated Investment Portfolio
(unaudited)
$ in millions
December 31, 2017 December 31, 2016
Investment Positions:
Cost or Amortized
Cost
Net Unrealized Gain
Fair Value
%
Fair Value
%
Fixed maturities $ 2,421.0 $ 42.4 $ 2,463.4 90 % $ 2,344.4 89 %
Equity securities 116.7 93.6 210.3 8 192.2 7 Short-term investments
4.0 — 4.0 — 16.0 1 Cash and cash equivalents 73.3 — 73.3 3 67.2 3
Restricted cash and cash equivalents 1.0 — 1.0
— 3.6 — Total investments and cash $ 2,616.0
$ 136.0 $ 2,752.0 100 % $ 2,623.4 100 %
Breakout of Fixed Maturities: U.S. Treasuries and
Agencies $ 147.1 $ 1.7 $ 148.8 6 % $ 140.2 6 % States and
Municipalities 617.0 25.5 642.5 26 851.6 36 Corporate Securities
1,103.4 14.6 1,118.0 45 956.7 41 Mortgage-Backed Securities 494.8
0.5 495.3 20 353.5 15 Asset-Backed Securities 58.7 0.1
58.8 2 42.4 2 Total fixed
maturities $ 2,421.0 $ 42.4 $ 2,463.4 100 % $
2,344.4 100 %
Weighted average book yield
3.1
%
3.1
%
Weighted average tax equivalent yield
3.5
%
3.6
%
Average credit quality (S&P)
AA-
AA-
Duration
4.2
4.3
EMPLOYERS HOLDINGS, INC.
Book Value Per Share
(unaudited)
$ in millions, except per share
amounts
December 31, 2017 December 31, 2016
Numerators: Stockholders' equity A $ 947.7 $
840.6 Plus: Deferred Gain 163.6 174.9
Stockholders' equity including the Deferred Gain(1)
B 1,111.3 1,015.5 Accumulated other comprehensive income
(136.0 ) (114.6 ) Income tax benefit related to accumulated other
comprehensive income 28.6 40.1
Adjusted
stockholders' equity(1) C $ 1,003.9 $
941.0
Denominator (shares outstanding)
D 32,597,819 32,128,922 Book value per share(1)
A
/ D $ 29.07 $ 26.16 Book value per share including the Deferred
Gain(1)
B / D 34.09 31.61 Adjusted book value per share(1)
C / D 30.80 29.29 Cash dividends declared per share $
0.60 $ 0.36
YTD Change in:(2) Book value per
share 13.4 % 12.3 % Book value per share including the Deferred
Gain 9.7 8.4 Adjusted book value per share 7.2 10.2 (1) See
Page 10 for information regarding our use of Non-GAAP Financial
Measures. (2) Reflects the change per share after taking into
account dividends declared in the period.
EMPLOYERS HOLDINGS, INC.
Earnings Per Share (unaudited)
$ in millions, except per share
amounts
Three Months Ended Years Ended December
31, December 31, 2017 2016
2017 2016 Numerators: Net income
A $ 31.3 $ 35.5 $ 101.2 $ 106.7 Impact of the LPT Agreement
(3.1 ) (2.9 ) (11.6 ) (16.6 )
Net income before impact of the
LPT (1) B $ 28.2 $ 32.6 $ 89.6
$ 90.1 Net realized gains on investments — (2.1 )
(7.4 ) (11.2 ) Gain on redemption of notes payable — — (2.1 ) —
Write-off of previously capitalized costs — — 7.5 — Amortization of
intangibles — 0.1 0.3 0.4 Income tax benefit related to items
excluded from Net income — 0.7 0.6 3.7 Net impact of tax reform 7.0
— 7.0 —
Adjusted net income
(1) C $ 35.2 $ 31.3 $ 95.5 $
83.0
Denominators: Average common shares
outstanding (basic)
D 32,641,438 32,247,251 32,501,576
32,434,580 Average common shares outstanding (diluted)
E
33,219,850 32,861,090 33,060,760 32,976,835
Earnings per
share: Basic
A / D $ 0.96 $ 1.10 $ 3.11 $ 3.29 Diluted
A / E 0.94 1.08 3.06 3.24
Earnings per share
before impact of the LPT:(1) Basic
B / D $ 0.86 $
1.01 $ 2.76 $ 2.78 Diluted
B / E 0.85 0.99 2.71 2.73
Adjusted earnings per share:(1) Basic
C / D $
1.08 $ 0.97 $ 2.94 $ 2.56 Diluted
C / E 1.06 0.95 2.89 2.52
(1) See Page 10 for information regarding our use of
Non-GAAP Financial Measures.
Glossary of Financial
Measures
Within this earnings release we present the following measures,
each of which are "non-GAAP financial measures." 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 (Deferred 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.
Adjusted net 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), net impact of tax
reform, gain on redemption of notes payable (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. The Company previously referred to Adjusted net
income as Operating income.
Stockholders' equity including the Deferred Gain is
stockholders' equity including the Deferred 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 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 Adjusted 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. The
Company previously referred to Adjusted return on stockholders'
equity as Operating return on adjusted stockholders' equity.
Book value per share, Book value per share including the
Deferred Gain, 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. The Company previously referred to Book value
per share as GAAP book value per share, and Book value per share
including Deferred Gain as Book value per share.
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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180221006419/en/
Employers Holdings, Inc.Media:Ty Vukelich,
775-327-2677tvukelich@employers.comorAnalysts:Mike Paquette,
775-327-2562mwoodard@employers.com
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