- Net income of $25.6 million ($0.77 per
diluted share), adjusted net income of $29.3 million ($0.88 per
diluted share).
- Gross premiums written of $211.6
million, up 7% year-over-year.
- Underwriting income of $18.3 million
versus $8.9 million a year ago.
- Combined ratio of 89.6%, combined ratio
before the impact of the LPT of 91.1%.
Employers Holdings, Inc. (“EHI” or the “Company”)
(NYSE:EIG) today reported the following for the first quarter
of 2018: (i) net income of $25.6 million ($0.77 per diluted share);
(ii) net income before the impact of the LPT of $23.0 million
($0.69 per diluted share); and (iii) adjusted net income of $29.3
million ($0.88 per diluted share).
The Company's adjusted net income for the first quarter of 2018
increased $10.4 million year-over-year. This increase primarily
reflects: (i) strong underwriting results highlighted by a 62.5%
current accident year loss ratio before the impact of the LPT and
$12.4 million of favorable prior year loss reserve development, and
(ii) a reduction in our effective income tax rate from 21.4% to
12.9%, primarily reflecting the favorable impact of the December
2017 Tax Cuts and Job Act.
The Company's net income and net income before the impact of the
LPT for the first quarter of 2018 increased by $2.4 million and
$2.7 million, respectively, year-over-year. These first quarter
2018 net income measures were each adversely impacted by $10.2
million of after tax unrealized investment losses relating to the
Company’s equity investments. Prior to January 1, 2018, the
Company’s unrealized gains and losses on equity securities were not
a component of net income or net income before the impact of the
LPT.
The Company’s book value per share of $28.40 and book value per
share including the Deferred Gain of $33.32 decreased by 1.6% and
1.7% during the first quarter of 2018, respectively, each computed
after taking into account dividends declared. These first quarter
2018 book value measures were each adversely impacted by $35.8
million of after tax unrealized losses relating to the Company’s
fixed maturity investments caused by an increase in market interest
rates.
Chief Executive Officer Douglas Dirks commented on the results:
“The first quarter marked a strong beginning to 2018 for EMPLOYERS.
During the quarter we grew written premiums by 7% year-over-year,
lowered our current accident year loss provision and recognized
favorable development on our prior year loss reserves.
As a result of the addition of new writing states, an enhanced
sales force and greater leveraging of our partnerships and
alliances, we were able to increase our business writings. Loss
costs and frequency trends continue to be favorable, despite highly
competitive market conditions.
Our underwriting and other operating expense ratio increased by
1.8 percentage points in the quarter, in-line with our expectations
as we develop and implement new digital capabilities.”
Summary of First Quarter 2018
Operating Results(All comparisons vs. first quarter
2017, unless noted otherwise).
Gross premiums written were $211.6 million, an increase of 7%
year-over-year. The increase was due primarily to new business
writings, partially offset by declines in renewal business. Net
earned premiums were $176.6 million, an increase of 1%
year-over-year.
The loss and LAE ratio before the impact of the LPT of 55.5%
decreased 8.3 percentage points year-over-year 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. Favorable prior year loss reserve development
represented 7.0 percentage points of the decline.
The commission expense ratio of 13.4% increased 1.1 percentage
points year-over-year 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 22.2%
increased 1.8 percentage points year-over-year due largely to
expenses associated with the development and implementation of new
technologies and capabilities.
Net investment income of $19.4 million, an increase of 3%
year-over-year. The increase is due to a higher pre-tax book yield
on invested assets.
Income tax expense was $3.8 million, a decrease of 40%
year-over-year. The decrease is due to a reduction in the statutory
Federal income tax rate from 35% to 21% as a result of the Tax Cuts
and Job Act.
Stockholders’ Equity including the
Deferred Gain, First Quarter 2018 Dividend
Declaration
Stockholders’ equity including the Deferred Gain was $1,091.3
million, a decrease of 2% from December 31, 2017 as a result of
unrealized losses relating to the Company's fixed maturity
investments.
On April 25, 2018, the Board of Directors declared a second
quarter 2018 dividend of $0.20 per share. The dividend is payable
on May 23, 2018 to stockholders of record as of May 9,
2018.
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 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 26, 2018, 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
2449837.
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.First Quarter 2018Financial
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 March 31, 2018
2017 % change Selected financial
highlights: Gross premiums written $ 211.6 $ 197.6 7 % Net
premiums written 210.1 196.1 7 Net premiums earned 176.6 175.3 1
Net investment income 19.4 18.8 3 Underwriting income(1) 18.3 8.9
106 Net income before impact of the LPT(1) 23.0 20.3 13 Adjusted
net income(1) 29.3 18.9 55 Net income 25.6 23.2 10 Comprehensive
(loss) income (9.8 ) 31.2 n/m Total assets 3,847.9 3,833.6 —
Stockholders' equity 930.3 867.5 7 Stockholders' equity including
the Deferred Gain(2) 1,091.3 1,039.4 5 Adjusted stockholders'
equity(2) 1,093.3 956.9 14 Annualized adjusted return on
stockholders' equity(3) 11.2 % 8.0 % 40 %
Amounts per share:
Cash dividends declared per share $ 0.20 $ 0.15 33 % Earnings per
diluted share(4) 0.77 0.70 10 Earnings per diluted share before
impact of the LPT(4) 0.69 0.62 11 Adjusted earnings per diluted
share(4) 0.88 0.57 54 Book value per share(2) 28.40 26.88 6 Book
value per share including the Deferred Gain(2) 33.32 32.20 3
Adjusted book value per share(2) 33.38 29.65 13
Combined ratio
before impact of the LPT:(5) Loss and loss adjustment
expense ratio: Current year 62.5 % 63.8 % Prior year (7.0 ) —
Loss and loss adjustment expense ratio 55.5 % 63.8 %
Commission expense ratio 13.4 12.3 Underwriting and other operating
expenses ratio 22.2 20.4 Combined ratio before impact
of the LPT 91.1 % 96.6 % (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
March 31, 2018 December 31, 2017
ASSETS Investments, cash and cash equivalents $ 2,725.6 $
2,752.0 Accrued investment income 18.9 19.6 Premiums receivable,
net 350.0 326.7 Reinsurance recoverable on paid and unpaid losses
538.0 544.2 Deferred policy acquisition costs 50.8 45.8 Deferred
income taxes, net 26.5 28.7 Contingent commission receivable—LPT
Agreement 31.4 31.4 Other assets 106.7 91.7 Total
assets $ 3,847.9 $ 3,840.1
LIABILITIES
Unpaid losses and LAE $ 2,258.1 $ 2,266.1 Unearned premiums 351.9
318.3 Commissions and premium taxes payable 55.8 55.3 Deferred Gain
161.0 163.6 Notes payable 20.0 20.0 Other liabilities 70.8
69.1 Total liabilities $ 2,917.6 $ 2,892.4
STOCKHOLDERS' EQUITY Common stock and additional paid-in
capital $ 381.0 $ 381.8 Retained earnings(2) 935.0 842.2
Accumulated other comprehensive (loss) income, net(2) (2.0 ) 107.4
Treasury stock, at cost (383.7 ) (383.7 ) Total stockholders’
equity 930.3 947.7 Total liabilities and
stockholders’ equity $ 3,847.9 $ 3,840.1
Stockholders' equity
including the Deferred Gain (1) $ 1,091.3 $ 1,111.3 Adjusted
stockholders' equity (1) 1,093.3
1,003.9 Book value per share (1) $ 28.40 $ 29.07 Book value
per share including the Deferred Gain(1) 33.32 34.09 Adjusted book
value per share (1) 33.38 30.80
(1)
See Page 8 for calculations and Page 10
for information regarding our use of Non-GAAP Financial
Measures.
(2)
Adoption of a new accounting standard (ASU
No. 2016-01) resulted in a $74.0 million reclassification
adjustment from Accumulated other comprehensive income to Retained
earnings as of January 1, 2018.
EMPLOYERS HOLDINGS, INC.
Summary Consolidated Income Statements
(unaudited)
$ in millions, except per share
amounts
Three Months Ended March 31, 2018
2017 Underwriting revenues: Gross
premiums written $ 211.6 $ 197.6 Premiums ceded (1.5 ) (1.5 ) Net
premiums written 210.1 196.1 Net premiums earned 176.6 175.3
Underwriting expenses: Losses and LAE incurred (95.4 )
(109.0 ) Commission expense (23.7 ) (21.5 ) Underwriting and other
operating expenses (39.2 ) (35.9 )
Underwriting income 18.3
8.9 Net investment income 19.4 18.8 Net realized and unrealized
(losses) gains on investments(2) (8.0 ) 2.2 Interest and financing
expenses (0.3 ) (0.4 ) Income tax expense (3.8 ) (6.3 )
Net
income 25.6 23.2 Unrealized AFS investment (losses) gains
arising during the period, net of tax(3) (35.8 ) 9.4
Reclassification adjustment for realized AFS investment losses
(gains) in net income, net of tax(3) 0.4 (1.4 )
Comprehensive (loss) income $ (9.8 )
$ 31.2 Net Income $ 25.6 $ 23.2 Amortization of the
Deferred Gain - losses (2.1 ) (2.4 ) Amortization of the Deferred
Gain - contingent commission (0.5 ) (0.5 )
Net income before
impact of the LPT Agreement (1) 23.0 20.3 Net realized
and unrealized losses (gains) on investments 8.0 (2.2 )
Amortization of intangibles — 0.1 Income tax (benefit) expense
related to items excluded from Net income (1.7 )
0.7
Adjusted net income (1)
$ 29.3 $ 18.9
(1)
See Page 10 regarding our use of Non-GAAP
Financial Measures.
(2)
Adoption of a new accounting standard (ASU
No. 2016-01) resulting in $12.9 million of unrealized losses on
equity securities at March 31, 2018.
(3)
AFS = Available for Sale securities.
EMPLOYERS HOLDINGS, INC.
Return on Equity (unaudited)
$ in millions, except per share
amounts
Three Months Ended March 31, 2018
2017 Net income A $ 25.6
$ 23.2 Impact of the LPT Agreement (2.6 ) (2.9 ) Net realized and
unrealized losses (gains) on investments(2) 8.0 (2.2 ) Amortization
of intangibles — 0.1 Income tax (benefit) expense related to items
excluded from Net income (1.7 ) 0.7
Adjusted net
income (1) B 29.3
18.9 Stockholders' equity - end of
period $ 930.3 $ 867.5 Stockholders' equity - beginning of
period 947.7 840.6
Average stockholders' equity
C 939.0 854.1
Stockholders' equity - end of period $ 930.3 $ 867.5
Deferred Gain - end of period 161.0 171.9 Accumulated other
comprehensive loss (income) - end of period(3) 2.5 (126.9 ) Income
taxes related to accumulated other comprehensive gains and losses -
end of period (0.5 ) 44.4 Adjusted stockholders' equity -
end of period 1,093.3 956.9 Adjusted stockholders' equity -
beginning of period 1,003.9 941.0
Average adjusted
stockholders' equity (1) D
1,048.6 949.0 Return on
stockholders' equity
A / C 2.7 % 2.7 %
Annualized return
on stockholders' equity 10.9 10.9 Adjusted return on
stockholders' equity (1)
B / D 2.8 % 2.0 %
Annualized
adjusted return on stockholders' equity (1)
11.2 8.0
(1)
See Page 10 for information regarding our
use of Non-GAAP Financial Measures.
(2)
Adoption of a new accounting standard (ASU
No. 2016-01) resulting in $12.9 million of unrealized losses on
equity securities at March 31, 2018.
(3)
Adoption of a new accounting standard (ASU
No. 2016-01) resulted in a $74.0 million reclassification
adjustment from Accumulated other comprehensive income to Retained
earnings as of January 1, 2018.
EMPLOYERS HOLDINGS, INC.
Combined Ratios (unaudited)
$ in millions, except per share
amounts
Three Months Ended March 31, 2018
2017 Net premiums earned
A $ 176.6 $
175.3 Losses and LAE incurred
B 95.4 109.0 Amortization of
the Deferred Gain - losses 2.1 2.4 Amortization of the Deferred
Gain - contingent commission 0.5 0.5 Losses and LAE before impact
of the LPT (1)
C 98.0 111.9 Prior accident year favorable
loss reserve development (12.4 ) — Losses and LAE before
impact of the LPT - current accident year
D $ 110.4 $
111.9 Commission expense
E $ 23.7 $ 21.5 Underwriting
and other operating expenses
F
39.2 35.9
Combined ratio: Loss
and LAE ratio
B/A 54.0 % 62.2 % Commission expense ratio
E/A 13.4 12.3 Underwriting and other operating expenses
ratio
F/A 22.2 20.4 Combined ratio
89.6 % 94.9 %
Combined
ratio before impact of the LPT: (1) Loss and LAE ratio
before impact of the LPT
C/A 55.5 % 63.8 % Commission
expense ratio
E/A 13.4 12.3 Underwriting and other operating
expenses ratio
F/A 22.2 20.4 Combined ratio
before impact of the LPT 91.1 %
96.6 %
Combined ratio before impact of the LPT:
current accident year (1) Loss and LAE ratio before
impact of the LPT
D/A 62.5 % 63.8 % Commission expense ratio
E/A 13.4 12.3 Underwriting and other operating expenses
ratio
F/A 22.2 20.4 Combined ratio before
impact of the LPT: current accident year
98.1 % 96.6 % (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 March 31, 2018
2017 Unpaid losses and LAE at beginning
of period $ 2,266.1 $ 2,301.0 Reinsurance recoverable on unpaid
losses and LAE 537.0 580.0 Net unpaid losses and LAE at
beginning of period 1,729.1 1,721.0 Losses and LAE incurred:
Current year losses 110.4 111.9 Prior year losses on voluntary
business (12.0 ) — Prior year losses on involuntary business (0.4 )
— Total losses incurred 98.0 111.9 Losses and LAE paid:
Current year losses 5.9 4.7 Prior year losses 94.2 102.9
Total paid losses 100.1 107.6 Net unpaid losses and LAE at
end of period 1,727.0 1,725.3 Reinsurance recoverable on unpaid
losses and LAE 531.1 572.9 Unpaid losses and LAE at end of
period $ 2,258.1 $ 2,298.2
Total losses and LAE shown in the above table exclude
amortization of the Deferred Gain, which totaled $2.6 million and
$2.9 million for the three months ended March 31, 2018 and
2017, respectively.
EMPLOYERS HOLDINGS, INC.
Consolidated Investment Portfolio
(unaudited)
$ in millions
March 31, 2018 December 31, 2017 Cost
or
Amortized Net Unrealized Investment Positions:
Cost (Loss) Gain Fair Value
% Fair Value % Fixed maturities
$ 2,437.3 $ (2.5 ) $ 2,434.8 89 % $ 2,463.4 83 % Equity securities
118.0 80.7 198.7 7 210.3 7 Short-term investments 34.9 — 34.9 1 4.0
— Cash and cash equivalents 56.3 — 56.3 2 73.3 2 Restricted cash
and cash equivalents 0.9 — 0.9 —
1.0 — Total investments and cash
$ 2,647.4 $ 78.2 $ 2,725.6 100 %
$ 2,962.3 100 %
Breakout of Fixed
Maturities: U.S. Treasuries and Agencies $ 148.8 $ (0.2 ) $
148.6 6 % $ 148.8 6 % States and Municipalities 550.1 14.9 565.0 23
642.5 26 Corporate Securities 1,134.8 (7.5 ) 1,127.3 46 1,118.0 45
Mortgage-Backed Securities 541.5 (9.6 ) 531.9 22 495.3 20
Asset-Backed Securities 62.1 (0.1 ) 62.0 3
58.8 2 Total fixed maturities $ 2,437.3
$ (2.5 ) $ 2,434.8 100 % $ 2,463.4
100 %
Weighted average book yield
3.2
%
3.1
%
Average credit quality (S&P)
AA-
AA-
Duration
4.4
4.2
EMPLOYERS HOLDINGS, INC.
Book Value Per Share
(unaudited)
$ in millions, except per share
amounts
March 31, December 31, March 31,
December 31, 2018 2017 2017 2016
Numerators: Stockholders' equity A $ 930.3 $
947.7 $ 867.5 $ 840.6 Plus: Deferred Gain 161.0 163.6
171.9 174.9
Stockholders' equity including the
Deferred Gain (1) B 1,091.3 1,111.3 1,039.4
1,015.5 Accumulated other comprehensive loss (income)(2) 2.5 (136.0
) (126.9 ) (114.6 ) Income taxes related to accumulated other
comprehensive gains and losses (0.5 ) 28.6 44.4 40.1
Adjusted stockholders' equity (1) C $
1,093.3 $ 1,003.9 $ 956.9 $ 941.0
Denominator (shares outstanding) D 32,752,139
32,597,819 32,276,213 32,128,922 Book value per share (1)
A / D $ 28.40 $ 29.07 $ 26.88 $ 26.16 Book value per share
including the Deferred Gain(1)
B / D 33.32 34.09 32.20 31.61
Adjusted book value per share (1)
C / D 33.38 30.80 29.65
29.29 Cash dividends declared per share $ 0.20 $ 0.60 $ 0.15
$ 0.36
YTD Change in: (3) Book value per share
(1.6 )% 3.3 % Book value per share including the Deferred Gain (1.7
) 2.3 Adjusted book value per share 9.0 1.7
(1)
See Page 10 for information regarding our
use of Non-GAAP Financial Measures.
(2)
Adoption of a new accounting standard (ASU
No. 2016-01) resulted in a $74.0 million reclassification
adjustment from Accumulated other comprehensive income to Retained
earnings as of January 1, 2018.
(3)
Reflects the change in book value 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 March 31, 2018
2017 Numerators: Net income
A $ 25.6 $ 23.2 Impact of the LPT Agreement (2.6 ) (2.9 )
Net income before impact of the LPT (1) B 23.0
20.3 Net realized and unrealized losses (gains) on
investments(2) 8.0 (2.2 ) Amortization of intangibles — 0.1 Income
tax (benefit) expense related to items excluded from Net income
(1.7 ) 0.7
Adjusted net income (1) C $
29.3 $ 18.9
Denominators: Average
common shares outstanding (basic)
D 32,830,481 32,327,784
Average common shares outstanding (diluted)
E 33,320,420
32,965,367
Earnings per share: Basic
A / D $
0.78 $ 0.72 Diluted
A / E 0.77 0.70
Earnings per
share before impact of the LPT: (1) Basic
B / D $
0.70 $ 0.63 Diluted
B / E 0.69 0.62
Adjusted
earnings per share: (1) Basic
C / D $ 0.89 $ 0.58
Diluted
C / E 0.88 0.57
(1)
See Page 10 for information regarding our
use of Non-GAAP Financial Measures.
(2)
Adoption of a new accounting standard (ASU
No. 2016-01) resulting in $12.9 million of unrealized losses on
equity securities at March 31, 2018.
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 and
unrealized 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. 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: https://www.businesswire.com/news/home/20180425006728/en/
Employers Holdings, Inc.Media:Ty Vukelich,
775-327-2677tvukelich@employers.comorAnalysts:Mike Paquette,
775-327-2562mwoodard@employers.com
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