Company to Host Conference Call on Thursday,
October 26, 2023, at 11:00 a.m. Eastern Daylight Time
Employers Holdings, Inc. (the “Company”) (NYSE:EIG), 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, today
reported financial results for its third quarter ended September
30, 2023.
Financial Highlights:
(All comparisons vs. the third quarter of 2022, unless noted
otherwise).
- Net income of $14.0 million or $0.54 per share versus $19.1
million or $0.70 per share;
- Adjusted net income of $17.7 million or $0.68 per share versus
$15.5 million or $0.56 per share, an increase of 21% per
share;
- Gross premiums written of $196.2 million versus $188.6 million,
an increase of 4%;
- Net premiums earned of $184.6 million versus $178.7 million, an
increase of 3%;
- Net investment income of $25.9 million versus $23.7 million, an
increase of 9%;
- Net investment losses reflected on the income statement of $7.1
million versus net gains of $1.9 million;
- Ending policies in-force of 126,120, up 5%; and
- Returned $21.7 million to stockholders through a combination of
stock repurchases and regular quarterly dividends.
Management Commentary
Chief Executive Officer Katherine Antonello commented: “Our
third quarter results are a testament to the transformational
changes we are making at Employers. Wage increases, a continued
strong labor market for our target businesses and our disciplined
appetite expansion each contributed to higher new and renewal
premiums. As a result, we ended the quarter with more than 126,000
policies in-force, a record level representing increases in each of
the last thirteen consecutive quarters.
We have maintained our current accident year loss and LAE ratio
on voluntary business throughout the year at 63.3%, below the 64.0%
we maintained throughout 2022. As was the case in the third quarter
of 2022, we did not recognize any prior year loss reserve
development this quarter because: (i) a full actuarial study was
not performed; and (ii) the amount of indicated net prior year loss
reserve development was consistent with our expectations. We will
evaluate our prior year reserves in more detail at year-end when we
routinely perform a full reserve study.
Our total underwriting expenses (consisting of our commissions,
underwriting and general and administrative expenses) of $70.2
million this quarter were up $3.0 million, or 4% from a year ago.
The increase was largely driven by an increase in our variable
expenses (those that fluctuate with our premium volume) and higher
2023 agency incentive accruals, which are specific to individual
contracts and vary with agency growth and profitability. We remain
confident that we can further reduce our total underwriting
expenses, as a percentage of our earned premiums, in 2024.
We continue to actively return capital to our stockholders. Our
capital management efforts this quarter consisted of $14.4 million
of share repurchases and $7.3 million of regular quarterly
dividends, and our efforts year-to-date consisted of $61.6 million
of share repurchases and $22.0 million of regular quarterly
dividends. These actions reflect our strong balance sheet, abundant
underwriting capital and confidence in the Company’s future
operations.”
Summary of Third Quarter 2023 Results
(All comparisons vs. the third quarter of 2022, unless noted
otherwise).
Gross premiums written were $196.2 million, an increase of 4%.
The increase was primarily due to higher new and renewal business
writings. Net premiums earned were $184.6 million, an increase of
3%.
Losses and loss adjustment expenses were $114.9 million, an
increase of 2%. The increase was primarily due to higher earned
premiums.
Commission expenses were $26.7 million versus $25.3 million, an
increase of 6%. The increase was primarily due to higher earned
premiums and higher 2023 agency incentive accruals.
Underwriting and general and administrative expenses were $43.5
million, an increase of 4%. The increase was primarily due to
higher: (i) payroll-related expenses; and (ii) policyholder
dividends and bad debt expenses, with each resulting from the
increase in earned premiums.
Net investment income was $25.9 million, an increase of 9%. The
increase was due to higher bond yields, partially offset by lower
invested balances of fixed maturity securities and short-term
investments, as measured by amortized cost.
Net realized and unrealized gains (losses) on investments
reflected on the income statement were $(7.1) million versus $1.9
million.
Income tax expense was $3.4 million (19.5% effective rate)
versus $4.7 million (19.7% effective rate). The effective rates
during each of the periods presented included income tax benefits
and exclusions associated with tax-advantaged investment income,
LPT adjustments, and deferred gain amortization.
The Company’s book value per share including the deferred gain
of $39.63 increased by 4.6% during the first nine months of 2023,
computed after taking into account dividends declared. This measure
was unfavorably impacted by $20.0 million of after tax unrealized
losses arising from fixed maturity securities (which are reflected
on the balance sheet) and was favorably impacted by $11.0 million
of net after tax unrealized gains arising from equity securities
and other investments (which are reflected on the income
statement). The Company’s adjusted book value per share of $45.72
increased by 6.3% during the first nine months of 2023, computed
after taking into account dividends declared. This measure was
favorably impacted by the net after tax unrealized gains arising
from equity securities and other investments previously
described.
Summary of Results by Segment
(see page 14 of the Financial Supplement for a description of
our reportable segments. All comparisons vs. the third quarter of
2022, unless noted otherwise).
Employers Segment
Our Employers segment reported net income before income taxes of
$20.8 million versus $26.1 million.
Highlights include the following:
- Earned premium of $182.7 million versus $177.9 million;
- Underwriting income of $4.1 million versus $3.2 million;
- Combined ratio of 97.8% versus 98.3%;
- Calendar year loss and LAE ratio of 63.2% versus 64.0%;
- Commission expense ratio of 14.6% versus 14.2%;
- Underwriting expense ratio of 20.0% versus 20.1%;
- Net investment income of $23.4 million versus $21.4 million;
and
- Net realized and unrealized gains (losses) on investments
reflected on the income statement of $(5.9) million versus $2.4
million.
Cerity Segment
Our Cerity segment reported a net loss before income taxes of
$1.9 million versus $2.4 million.
Highlights include the following:
- Earned premium of $1.9 million versus $0.8 million;
- Underwriting loss of $3.1 million versus $3.3 million;
- Net investment income of $1.6 million versus $1.2 million;
and
- Net realized and unrealized losses on investments reflected on
the income statement of $0.4 million versus $0.3 million.
Corporate and Other
Corporate and Other activities reported net income (loss) before
income taxes of $(1.5) million versus $0.1 million.
Highlights include the following:
- LPT amortization of $1.9 million, which served to reduce losses
and LAE, versus $2.1 million;
- General and administrative expenses of $3.4 million versus $2.8
million.
- Net investment income of $0.9 million versus $1.1 million;
and
- Net realized and unrealized losses on investments reflected on
the income statement of $0.8 million versus $0.2 million.
Fourth Quarter 2023 Dividend Declaration
Today the Board of Directors declared a regular quarterly
dividend of $0.28 per share. The dividend is payable on November
22, 2023 to stockholders of record as of November 8, 2023.
Stock Repurchases
During the third quarter of 2023, the Company repurchased
367,209 shares of its common stock at an average price of $38.95
per share. The Company currently has a remaining share repurchase
authorization of $36.4 million.
Earnings Conference Call and Webcast
The Company will review these financial results via a conference
call and webcast on Thursday, October 26, 2023, at 11:00 a.m.
Eastern Daylight Time / 8:00 a.m. Pacific Daylight Time.
To participate in the live conference call by telephone, dial
1-877-423-9820 or 1-201-493-6749.
A live audio-only broadcast will be accessible via webcast in
the Investors section of the Company’s website at
www.employers.com. An archived version of the webcast will also be
accessible on the Company’s website following the live call.
Reconciliation of Non-GAAP Financial Measures to GAAP
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.
Within this earnings release we present various financial
measures, some of which are “Non-GAAP financial measures” 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
our most directly comparable GAAP financial measures is included in
the attached Financial Supplement. 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.
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, economic or market conditions, including the evolving
nature of the COVID-19 pandemic, current levels of inflation,
changes in interest rates, labor market expectations, catastrophic
events or geo-political conditions, legislative or regulatory
actions or court decisions, 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. The Company and its management
caution investors that such forward-looking statements are not
guarantees of future performance. Risks and uncertainties are
inherent in the Company’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 the
Company’s public filings with the U.S. Securities and Exchange
Commission (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.
Filings with the SEC
The Company’s filings with the SEC and its quarterly investor
presentations can be accessed through the “Investors” link on the
Company's website, www.employers.com. The Company's filings with
the SEC can also be accessed through the SEC's EDGAR Database at
www.sec.gov (EDGAR CIK No. 0001379041).
About Employers Holdings, Inc.
EMPLOYERS® and America’s small business insurance specialist®
are registered trademarks of EIG Services, Inc. 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 operates throughout the United States, with
the exception of four states that are served exclusively by their
state funds. Insurance is offered through Employers Insurance
Company of Nevada, Employers Compensation Insurance Company,
Employers Preferred Insurance Company, Employers Assurance Company
and Cerity Insurance Company, all rated A- (Excellent) by the A.M.
Best Company. Not all companies do business in all jurisdictions.
See www.employers.com and www.cerity.com for coverage
availability.
Employers Holdings, Inc. Third Quarter 2023 Financial
Supplement
EMPLOYERS HOLDINGS, INC. Table of
Contents
Page
1
Consolidated Financial Highlights
2
Summary Consolidated Balance Sheets
3
Summary Consolidated Income Statements
4
Net Income (Loss) Before Income Taxes by
Segment
8
Return on Equity
9
Roll-forward of Unpaid Losses and LAE
10
Consolidated Investment Portfolio
11
Book Value Per Share
12
Earnings Per Share
13
Non-GAAP Financial Measures
14
Description of Reportable Segments
EMPLOYERS HOLDINGS, INC. Consolidated
Financial Highlights (unaudited) $ in millions, except per
share amounts
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
% change
2023
2022
% change
Selected financial highlights:
Gross premiums written
$
196.2
$
188.6
4
%
$
589.5
$
540.4
9
%
Net premiums written
194.5
186.8
4
584.2
535.3
9
Net premiums earned
184.6
178.7
3
534.4
494.1
8
Net investment income
25.9
23.7
9
80.3
62.8
28
Net income (loss) before impact of the
LPT(1)
12.1
17.0
(29
)
66.6
(5.0
)
n/m
Adjusted net income(1)
17.7
15.5
14
65.6
46.7
40
Net income (loss) before income taxes
17.4
23.8
(27
)
90.3
(0.1
)
n/m
Net Income
14.0
19.1
(27
)
72.5
1.3
n/m
Total Comprehensive (loss) income
(12.1
)
(45.1
)
73
54.8
(218.2
)
125
Total assets
3,527.0
3,708.7
(5
)
Stockholders' equity
919.0
919.0
—
Stockholders' equity including the
Deferred Gain(2)
1,019.2
1,027.1
(1
)
Adjusted stockholders' equity(2)
1,175.8
1,186.0
(1
)
Annualized adjusted return on
stockholders' equity(3)
6.0
%
5.2
%
15
%
7.4
%
5.1
%
45
%
Amounts per share:
Cash dividends declared per share
$
0.28
$
0.26
8
%
$
0.82
$
1.77
(54
)%
Earnings per diluted share(4)
0.54
0.70
(23
)
2.71
0.05
n/m
Earnings (loss) per diluted share before
impact of the LPT(4)
0.46
0.62
(26
)
2.49
(0.18
)
n/m
Adjusted earnings per diluted share(4)
0.68
0.56
21
2.45
1.69
45
Book value per share(2)
35.73
33.79
6
Book value per share including the
Deferred Gain(2)
39.63
37.77
5
Adjusted book value per share(2)
45.72
43.61
5
Financial information by
Segment(5):
Net income (loss) before income taxes
Employers
$
20.8
$
26.1
(20
)%
$
97.5
$
16.5
491
Cerity
(1.9
)
(2.4
)
21
(5.7
)
(8.2
)
30
Corporate and Other
(1.5
)
0.1
n/m
(1.5
)
(8.4
)
82
n/m - not meaningful
(1) See Page 3 for calculations
and Page 13 for information regarding our use of Non-GAAP Financial
Measures.
(2) See Page 11 for calculations
and Page 13 for information regarding our use of Non-GAAP Financial
Measures.
(3) See Page 8 for calculations
and Page 13 for information regarding our use of Non-GAAP Financial
Measures.
(4) See Page 12 for description
and calculations and Page 13 for information regarding our use of
Non-GAAP Financial Measures.
(5) See Pages 4-7 for details and
Page 14 for a description of our reportable segments.
EMPLOYERS HOLDINGS, INC. Summary
Consolidated Balance Sheets (unaudited) $ in millions,
except per share amounts
September 30,
2023
December 31,
2022
ASSETS
Investments, cash and cash equivalents
$
2,442.9
$
2,658.2
Accrued investment income
18.5
19.0
Premiums receivable, net
363.3
305.9
Reinsurance recoverable, net of allowance,
on paid and unpaid losses and LAE
437.2
451.3
Deferred policy acquisition costs
57.1
48.3
Deferred income tax asset, net
64.2
62.7
Contingent commission receivable—LPT
Agreement
13.9
13.9
Other assets
129.9
157.4
Total assets
$
3,527.0
$
3,716.7
LIABILITIES
Unpaid losses and LAE
$
1,913.4
$
1,960.7
Unearned premiums
387.0
339.5
Commissions and premium taxes payable
62.8
58.2
Deferred Gain
100.2
106.1
FHLB Advances(1)
40.4
182.5
Other liabilities
104.2
125.5
Total liabilities
$
2,608.0
$
2,772.5
STOCKHOLDERS' EQUITY
Common stock and additional paid-in
capital
$
418.8
$
415.2
Retained earnings
1,346.1
1,295.6
Accumulated other comprehensive loss
(156.6
)
(138.9
)
Treasury stock, at cost
(689.3
)
(627.7
)
Total stockholders’ equity
919.0
944.2
Total liabilities and stockholders’
equity
$
3,527.0
$
3,716.7
Stockholders' equity including the
Deferred Gain (2)
$
1,019.2
$
1,050.3
Adjusted stockholders' equity (2)
1,175.8
1,189.2
Book value per share (2)
$
35.73
$
34.76
Book value per share including the
Deferred Gain(2)
39.63
38.67
Adjusted book value per share (2)
45.72
43.78
(1) FHLB=Federal Home Loan Bank
(2) See Page 11 for calculations and Page
13 for information regarding our use of Non-GAAP Financial
Measures.
EMPLOYERS HOLDINGS, INC. Summary
Consolidated Income Statements (unaudited) $ in
millions
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Revenues:
Net premiums earned
$
184.6
$
178.7
$
534.4
$
494.1
Net investment income
25.9
23.7
80.3
62.8
Net realized and unrealized gains (losses)
on investments(1)
(7.1
)
1.9
10.7
(65.5
)
Other income (loss)
0.1
0.1
(0.2
)
0.3
Total revenues
203.5
204.4
625.2
491.7
Expenses:
Losses and LAE incurred
(114.9
)
(112.3
)
(312.8
)
(299.7
)
Commission expense
(26.7
)
(25.3
)
(73.8
)
(69.9
)
Underwriting and general and
administrative expenses
(43.5
)
(41.9
)
(133.7
)
(120.6
)
Interest and financing expenses
(1.0
)
(1.1
)
(5.2
)
(1.6
)
Other expenses
—
—
(9.4
)
—
Total expenses
(186.1
)
(180.6
)
(534.9
)
(491.8
)
Net income (loss) before income taxes
17.4
23.8
90.3
(0.1
)
Income tax (expense) benefit
(3.4
)
(4.7
)
(17.8
)
1.4
Net Income
14.0
19.1
72.5
1.3
Unrealized AFS investment losses arising
during the period, net of tax(2)
(27.0
)
(60.3
)
(20.0
)
(222.2
)
Reclassification adjustment for net
realized AFS investment losses (gains) in net income,
net of tax(2)
0.9
(3.9
)
2.3
2.7
Total comprehensive (loss)
income
$
(12.1
)
$
(45.1
)
$
54.8
$
(218.2
)
Net Income
$
14.0
$
19.1
$
72.5
$
1.3
Amortization of the Deferred Gain -
losses
(1.5
)
(1.7
)
(4.7
)
(5.1
)
Amortization of the Deferred Gain -
contingent commission
(0.4
)
(0.4
)
(1.2
)
(1.2
)
Net income (loss) before impact of the
LPT Agreement (3)
12.1
17.0
66.6
(5.0
)
Net realized and unrealized losses (gains)
on investments
7.1
(1.9
)
(10.7
)
65.5
Lease termination and asset impairment
charges
—
—
9.4
—
Income tax expense (benefit) related to
items excluded from Net income or loss
(1.5
)
0.4
0.3
(13.8
)
Adjusted net income
$
17.7
$
15.5
$
65.6
$
46.7
(1) Includes net realized and unrealized
(losses) gains on equity securities and other investments of $(5.9)
million and $(3.1) million for the three months ended September 30,
2023 and 2022, respectively, and $13.6 million and $(62.1) million
for the nine months ended September 30, 2023 and 2022,
respectively.
(2) AFS = Available for Sale
securities.
(3) See Page 13 regarding our use of
Non-GAAP Financial Measures.
EMPLOYERS HOLDINGS, INC. Net Income
(Loss) Before Income Taxes by Segment (1) (unaudited) $ in
millions
Employers
Cerity
Corporate and
Other
Consolidated
Three Months Ended September 30,
2023
Gross premiums written
$
194.0
$
2.2
$
—
$
196.2
Net premiums written
192.3
2.2
—
194.5
Net premiums earned
A
182.7
1.9
—
184.6
Net investment income
23.4
1.6
0.9
25.9
Net realized and unrealized losses on
investments
(5.9
)
(0.4
)
(0.8
)
(7.1
)
Other income
0.1
—
—
0.1
Total revenues
200.3
3.1
0.1
203.5
Losses and LAE incurred (2)
B
(115.5
)
(1.3
)
1.9
(114.9
)
Commission expense
C
(26.6
)
(0.1
)
—
(26.7
)
Underwriting and general and
administrative expenses
D
(36.5
)
(3.6
)
(3.4
)
(43.5
)
Interest and financing expenses
(0.9
)
—
(0.1
)
(1.0
)
Other expenses
—
—
—
—
Total expenses
(179.5
)
(5.0
)
(1.6
)
(186.1
)
Net income (loss) before income
taxes
$
20.8
$
(1.9
)
$
(1.5
)
$
17.4
Underwriting income (loss)
A+B+C+D
4.1
(3.1
)
Loss and LAE expense ratio:
Current year
63.3
%
n/m
Prior years
(0.1
)
—
Loss and LAE ratio
63.2
n/m
Commission expense ratio
14.6
n/m
Underwriting expense ratio
20.0
n/m
Combined ratio
97.8
%
n/m
n/m - not meaningful
(1) See Page 14 for a description of our
reportable segments
(2) Losses and LAE in Corporate and Other
represent the impact of the LPT Agreement
EMPLOYERS HOLDINGS, INC. Net Income
(Loss) Before Income Taxes by Segment (1) (unaudited) $ in
millions
Employers
Cerity
Corporate and
Other
Consolidated
Three Months Ended September 30,
2022
Gross premiums written
$
187.1
$
1.5
$
—
$
188.6
Net premiums written
185.3
1.5
—
186.8
Net premiums earned
A
177.9
0.8
—
178.7
Net investment income
21.4
1.2
1.1
23.7
Net realized and unrealized gains (losses)
on investments
2.4
(0.3
)
(0.2
)
1.9
Other income
0.1
—
—
0.1
Total revenues
201.8
1.7
0.9
204.4
Losses and LAE incurred (2)
B
(113.8
)
(0.6
)
2.1
(112.3
)
Commission expense
C
(25.2
)
(0.1
)
—
(25.3
)
Underwriting and general and
administrative expenses
D
(35.7
)
(3.4
)
(2.8
)
(41.9
)
Interest and financing expenses
(1.0
)
—
(0.1
)
(1.1
)
Total expenses
(175.7
)
(4.1
)
(0.8
)
(180.6
)
Net income (loss) before income
taxes
$
26.1
$
(2.4
)
$
0.1
$
23.8
Underwriting income (loss)
A+B+C+D
$
3.2
$
(3.3
)
Loss and LAE expense ratio:
Current year
64.1
%
n/m
Prior years
(0.1
)
—
Loss and LAE ratio
64.0
n/m
Commission expense ratio
14.2
n/m
Underwriting expense ratio
20.1
n/m
Combined ratio
98.3
%
n/m
n/m - not meaningful
(1) See Page 14 for a description of our
reportable segments
(2) Losses and LAE in Corporate and Other
represent the impact of the LPT Agreement
EMPLOYERS HOLDINGS, INC. Net Income
(Loss) Before Income Taxes by Segment (1) (unaudited) $ in
millions
Employers
Cerity
Corporate and Other
Consolidated
Nine Months Ended September 30,
2023
Gross premiums written
$
584.4
$
5.1
$
—
$
589.5
Net premiums written
579.1
5.1
—
584.2
Net premiums earned
A
529.5
4.9
—
534.4
Net investment income
72.3
5.0
3.0
80.3
Net realized and unrealized gains (losses)
on investments
11.1
(0.2
)
(0.2
)
10.7
Other (loss) income
(0.2
)
—
—
(0.2
)
Total revenues
612.7
9.7
2.8
625.2
Losses and LAE incurred (2)
B
(315.5
)
(3.2
)
5.9
(312.8
)
Commission expense
C
(73.6
)
(0.2
)
—
(73.8
)
Underwriting and general and
administrative expenses
D
(111.8
)
(12.0
)
(9.9
)
(133.7
)
Interest and financing expenses
(4.9
)
—
(0.3
)
(5.2
)
Other expenses
(9.4
)
—
—
(9.4
)
Total expenses
(515.2
)
(15.4
)
(4.3
)
(534.9
)
Net income (loss) before income
taxes
$
97.5
$
(5.7
)
$
(1.5
)
$
90.3
Underwriting income (loss)
A+B+C+D
28.6
(10.5
)
Loss and LAE expense ratio:
Current year
63.4
%
n/m
Prior years
(3.8
)
—
Loss and LAE ratio
59.6
n/m
Commission expense ratio
13.9
n/m
Underwriting expense ratio
21.1
n/m
Combined ratio
94.6
%
n/m
n/m - not meaningful
(1) See Page 14 for a description of our
reportable segments
(2) Losses and LAE in Corporate and Other
represent the impact of the LPT Agreement
EMPLOYERS HOLDINGS, INC. Net Income
Before Income Taxes by Segment (1) (unaudited) $ in
millions
Employers
Cerity
Corporate and
Other
Consolidated
Nine Months Ended September 30,
2022
Gross premiums written
$
536.8
$
3.6
$
—
$
540.4
Net premiums written
531.7
3.6
—
535.3
Net premiums earned
A
492.1
2.0
—
494.1
Net investment income
57.7
2.7
2.4
62.8
Net realized and unrealized losses on
investments
(56.0
)
(1.6
)
(7.9
)
(65.5
)
Other income
0.3
—
—
0.3
Total revenues
494.1
3.1
(5.5
)
491.7
Losses and LAE incurred (2)
B
(304.7
)
(1.3
)
6.3
(299.7
)
Commission expense
C
(69.8
)
(0.1
)
—
(69.9
)
Underwriting and general and
administrative expenses
D
(101.8
)
(9.9
)
(8.9
)
(120.6
)
Interest and financing expenses
(1.3
)
—
(0.3
)
(1.6
)
Total expenses
(477.6
)
(11.3
)
(2.9
)
(491.8
)
Net income (loss) before income
taxes
$
16.5
$
(8.2
)
$
(8.4
)
$
(0.1
)
Underwriting income (loss)
A+B+C+D
$
15.8
$
(9.3
)
Loss and LAE expense ratio:
Current year
64.0
%
n/m
Prior years
(2.1
)
—
Loss and LAE ratio
61.9
n/m
Commission expense ratio
14.2
n/m
Underwriting expense ratio
20.7
n/m
Combined ratio
96.8
%
n/m
n/m - not meaningful
(1) See Page 14 for a description of our
reportable segments
(2) Losses and LAE in Corporate and Other
represent the impact of the LPT Agreement
EMPLOYERS HOLDINGS, INC. Return on
Equity (unaudited) $ in millions
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net income
A
$
14.0
$
19.1
$
72.5
$
1.3
Impact of the LPT Agreement
(1.9
)
(2.1
)
(5.9
)
(6.3
)
Net realized and unrealized (gains) losses
on investments
7.1
(1.9
)
(10.7
)
65.5
Lease termination and asset impairment
charges
—
—
9.4
—
Income tax expense (benefit) related to
items excluded from Net income
(1.5
)
0.4
0.3
(13.8
)
Adjusted net income (1)
B
17.7
15.5
65.6
46.7
Stockholders' equity - end of period
$
919.0
$
919.0
$
919.0
$
919.0
Stockholders' equity - beginning of
period
951.7
977.5
944.2
1,213.1
Average stockholders' equity
C
935.4
948.3
931.6
1,066.1
Stockholders' equity - end of period
$
919.0
$
919.0
$
919.0
$
919.0
Deferred Gain - end of period
100.2
108.1
100.2
108.1
Accumulated other comprehensive loss - end
of period
198.2
201.1
198.2
201.1
Income taxes related to accumulated other
comprehensive loss - end of period
(41.6
)
(42.2
)
(41.6
)
(42.2
)
Adjusted stockholders' equity - end of
period
1,175.8
1,186.0
1,175.8
1,186.0
Adjusted stockholders' equity - beginning
of period
1,184.3
1,182.4
1,189.2
1,266.9
Average adjusted stockholders' equity
(1)
D
1,180.1
1,184.2
1,182.5
1,226.5
Return on stockholders' equity
A / C
1.5
%
2.0
%
7.8
%
0.1
%
Annualized return on stockholders'
equity
6.0
8.1
10.4
0.2
Adjusted return on stockholders' equity
(1)
B / D
1.5
%
1.3
%
5.5
%
3.8
%
Annualized adjusted return on
stockholders' equity (1)
6.0
5.2
7.4
5.1
(1) See Page 13 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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Unpaid losses and LAE at beginning of
period
$
1,927.2
$
1,972.8
$
1,960.7
$
1,981.2
Reinsurance recoverable, excluding CECL
allowance, on unpaid losses and LAE
436.2
462.4
445.4
476.9
Net unpaid losses and LAE at beginning of
period
1,491.0
1,510.4
1,515.3
1,504.3
Losses and LAE incurred:
Current year losses
116.9
114.6
338.7
316.3
Prior year losses on voluntary
business
—
—
(20.0
)
(9.6
)
Prior year losses on involuntary
business
(0.1
)
(0.3
)
—
(0.7
)
Total losses incurred
116.8
114.3
318.7
306.0
Losses and LAE paid:
Current year losses
32.0
27.3
64.1
50.4
Prior year losses
89.0
73.9
283.1
236.4
Total paid losses
121.0
101.2
347.2
286.8
Net unpaid losses and LAE at end of
period
1,486.8
1,523.5
1,486.8
1,523.5
Reinsurance recoverable, excluding CECL
allowance, on unpaid losses and LAE
426.6
456.4
426.6
456.4
Unpaid losses and LAE at end of period
$
1,913.4
$
1,979.9
$
1,913.4
$
1,979.9
Total losses and LAE shown in the above table exclude
amortization of the Deferred Gain, which totaled $1.9 million and
$2.1 million for the three months ended September 30, 2023 and
2022, respectively, and $5.9 million and $6.3 million for the nine
months ended September 30, 2023 and 2022, respectively.
EMPLOYERS HOLDINGS, INC. Consolidated
Investment Portfolio (unaudited) $ in millions
September 30, 2023
December 31, 2022
Investment Positions:
Cost or
Amortized
Cost (1)
Net Unrealized
Gain (Loss)
Fair Value
%
Fair Value
%
Fixed maturity securities
$
2,198.6
$
(198.2
)
$
1,997.2
82
%
$
2,186.3
82
%
Equity securities
132.3
66.7
199.0
8
203.7
8
Short-term investments
46.8
—
46.8
2
119.1
4
Other invested assets
81.1
9.8
90.9
4
59.7
2
Cash and cash equivalents
108.8
—
108.8
4
89.2
3
Restricted cash and cash equivalents
0.2
—
0.2
—
0.2
—
Total investments and cash
$
2,567.8
$
(121.7
)
$
2,442.9
100
%
$
2,658.2
100
%
Breakout of Fixed Maturity
Securities:
U.S. Treasuries and agencies
$
101.1
$
(4.9
)
$
96.2
5
%
$
92.9
4
%
States and municipalities
240.8
(12.6
)
228.2
11
317.6
15
Corporate securities
1,023.9
(103.4
)
917.9
46
868.1
40
Mortgage-backed securities
465.8
(65.7
)
400.1
20
415.3
19
Asset-backed securities
113.6
(6.8
)
106.8
5
66.1
3
Collateralized loan obligations
127.8
(1.2
)
126.6
6
260.9
12
Bank loans and other
125.6
(3.6
)
121.4
6
165.4
8
Total fixed maturity securities
$
2,198.6
$
(198.2
)
$
1,997.2
100
%
$
2,186.3
100
%
Weighted average book yield
4.1
%
3.9
%
Average credit quality (S&P)
A+
A
Duration
4.4
3.9
(1) Amortized cost excludes allowance for
current expected credit losses (CECL) of $3.2 million.
EMPLOYERS HOLDINGS, INC. Book Value
Per Share (unaudited) $ in millions, except per share
amounts
September 30,
2023
June 30,
2023
December 31,
2022
September 30,
2022
Numerators:
Stockholders' equity
A
$
919.0
$
951.7
$
944.2
$
919.0
Plus: Deferred Gain
100.2
102.1
106.1
108.1
Stockholders' equity including the
Deferred Gain (1)
B
1,019.2
1,053.8
1,050.3
1,027.1
Accumulated other comprehensive loss
198.2
165.2
175.8
201.1
Income taxes related to accumulated other
comprehensive loss
(41.6
)
(34.7
)
(36.9
)
(42.2
)
Adjusted stockholders' equity
(1)
C
$
1,175.8
$
1,184.3
$
1,189.2
$
1,186.0
Denominator (shares
outstanding)
D
25,719,074
26,078,813
27,160,748
27,196,333
Book value per share (1)
A / D
$
35.73
$
36.49
$
34.76
$
33.79
Book value per share including the
Deferred Gain(1)
B / D
39.63
40.41
38.67
37.77
Adjusted book value per share (1)
C / D
45.72
45.41
43.78
43.61
YTD Change in: (2)
Book value per share
5.1
%
(18.7
)%
Book value per share including the
Deferred Gain
4.6
(17.4
)
Adjusted book value per share
6.3
(0.6
)
(1) See Page 13 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 of $0.82 and
$1.77 for the nine months ended September 30, 2023 and 2022,
respectively.
EMPLOYERS HOLDINGS, INC. Earnings Per
Share (unaudited) $ in millions, except per share
amounts
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Numerators:
Net income
A
$
14.0
$
19.1
$
72.5
$
1.3
Impact of the LPT Agreement
(1.9
)
(2.1
)
(5.9
)
(6.3
)
Net income (loss) before impact of the
LPT (1)
B
12.1
17.0
66.6
(5.0
)
Net realized and unrealized (gains) losses
on investments
7.1
(1.9
)
(10.7
)
65.5
Lease termination and asset impairment
charges
—
—
9.4
—
Income tax expense (benefit) related to
items excluded from Net income
(1.5
)
0.4
0.3
(13.8
)
Adjusted net income (1)
C
$
17.7
$
15.5
$
65.6
$
46.7
Denominators:
Average common shares outstanding
(basic)
D
25,981,984
27,312,409
26,612,443
27,504,566
Average common shares outstanding
(diluted)
E
26,118,280
27,436,428
26,767,056
27,681,666
Earnings per share:
Basic
A / D
$
0.54
$
0.70
$
2.72
$
0.05
Diluted
A / E
0.54
0.70
2.71
0.05
Earnings (loss) per share before impact
of the LPT: (1)
Basic
B / D
$
0.47
$
0.62
$
2.50
$
(0.18
)
Diluted (2)
B / E
0.46
0.62
2.49
(0.18
)
Adjusted earnings per share:
(1)
Basic
C / D
$
0.68
$
0.57
$
2.47
$
1.70
Diluted
C / E
0.68
0.56
2.45
1.69
(1) See Page 13 for information regarding
our use of Non-GAAP Financial Measures.
(2) Outstanding common share equivalents
are not considered in the Company's diluted earnings (loss) per
share computations in any period that involves a net loss.
Non-GAAP 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 3 for calculations) is net
income excluding the effects of the LPT Agreement, and net realized
and unrealized gains and losses on investments (net of tax), and
any miscellaneous non-recurring transactions (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 Gain (see
Page 11 for calculations) 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 11 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 adjusted return on
stockholders' equity metric.
Return on stockholders' equity and Adjusted return on
stockholders' equity (see Page 8 for calculations).
Management believes that these profitability measures are widely
used by our investors, analysts and other interested parties.
Book value per share, Book value per share including the
Deferred Gain, and Adjusted book value per share (see Page 11
for calculations). Management believes that these valuation
measures are widely used by our investors, analysts and other
interested parties.
Net income before impact of the LPT (see Page 3 for
calculations). Management believes that these performance and
underwriting measures are widely used by our investors, analysts
and other interested parties.
Description of Reportable
Segments
The Company has determined that it has two reportable segments:
Employers and Cerity. Each of these segments represents a separate
and distinct distribution channel through which the Company
conducts insurance business.
The nature and composition of each reportable segment and its
Corporate and Other activities are as follows:
- The Employers segment represents the traditional business
offered through the EMPLOYERS brand name (Employers) through its
agents, including business originated from its strategic
partnerships and alliances;
- The Cerity segment represents the as business offered under the
Cerity brand name, which includes the Company's direct-to-customer
business; and
- Corporate and Other activities consist of those holding company
expenses that are not considered to be underwriting in nature, the
financial impact of the LPT Agreement and legacy (pre-acquisition)
business assumed and ceded by Cerity Insurance Company. These
expenses are not considered to be part of a reportable segment and
are not otherwise allocated to a reportable segment.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231025715058/en/
Company: Mike Paquette (775) 327-2562 or
mpaquette@employers.com
Investor relations: Karin Daly, The Equity Group Inc. (212)
836-9623 or kdaly@equityny.com
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