Company to Host Conference Call on Thursday,
July 27, 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 second quarter ended June 30,
2023.
Financial Highlights:
(All comparisons vs. the second quarter of 2022, unless noted
otherwise).
- Net income of $34.9 million or $1.30 per share versus a net
loss of $15.6 million or a loss of $0.56 per share;
- Adjusted net income of $31.4 million or $1.17 per share versus
net income of $21.9 million or $0.79 per share;
- Gross premiums written of $198.4 million versus $179.4 million,
an increase of 11%;
- Net premiums earned of $177.1 million versus $165.2 million, an
increase of 7%;
- Net investment income of $26.8 million versus $20.0 million, an
increase of 34%;
- Net investment gains reflected on the income statement of $11.3
million versus net losses of $50.1 million;
- Other expenses of $9.4 million representing a non-recurring
charge in connection with an early lease termination;
- Record number of ending policies in-force of 124,848, up 6%;
and
- Returned $43.1 million to stockholders through a combination of
stock repurchases and regular quarterly dividends.
Management Commentary
Chief Executive Officer Katherine Antonello commented: “Our
excellent second quarter results are a testament to the
transformational changes we are making at Employers. Wage
increases, a strong labor market and our new sales and underwriting
operating model contributed to higher new and renewal premiums and
an increase in final audit premiums. Together with strong net
investment income and continued net investment gains, revenue
increased 59% year-over-year.
Our mid-year full reserve study led to the recognition of $20.0
million of net favorable prior year loss reserve development from
our voluntary business. Those actions, coupled with our continual
focus on our underwriting expenses yielded a combined ratio of
87.2% for our Employers segment, which is a terrific result. In
addition, our Cerity segment, which offers digital workers'
compensation insurance solutions directly to consumers, contributed
nicely to our growth in premiums and strong net investment
income.”
Ms. Antonello continued, “during the quarter we incurred a $9.4
million non-recurring charge in connection with the early lease
termination of our former corporate headquarters in Reno, Nevada.
This previously announced action was undertaken as part of an
ongoing review of our facility needs and will serve to continue our
meaningful reduction in underwriting expenses.
Lastly, today we declared a regular quarterly dividend of $0.28
per share and announced a new $50.0 million share repurchase plan
after exhausting the former plan prior to its scheduled expiration.
These actions reflect our strong balance sheet, abundant
underwriting capital and confidence in the Company’s future
operations.”
Summary of Second Quarter 2023 Results
(All comparisons vs. the second quarter of 2022, unless noted
otherwise).
Gross premiums written were $198.4 million, an increase of 11%.
The increase was primarily due to higher new and renewal business
writings and an increase in final audit premiums. Net premiums
earned were $177.1 million, an increase of 7%.
Losses and loss adjustment expenses were $90.5 million, a
decrease of 3%. The decrease was attributable to: (i) an increase
in net favorable prior accident year loss reserve development
recognized; partially offset by (ii) higher earned premiums. The
Company recognized $19.7 million of favorable development during
the quarter versus $10.0 million of favorable development
recognized a year ago.
Commission expenses were $23.6 million versus $23.7 million a
year ago.
Underwriting and general and administrative expenses were $46.0
million, an increase of 17%. The increase resulted primarily from
higher: (i) payroll-related expenses; and (ii) policyholder
dividends and bad debt expenses resulting from the increase in
earned premium.
Net investment income was $26.8 million, an increase of 34%. The
increase was due to higher bond yields and higher 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 $11.3 million versus $(50.1)
million.
Other expenses of $9.4 million consisted of a non-recurring
charge in connection with the early lease termination of our former
corporate headquarters in Reno, Nevada.
Income tax expense (benefit) was $8.9 million (20.3% effective
rate) versus $(5.8) million (27.1% 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 $40.41 increased by 5.9% during the first half of 2023, computed
after taking into account dividends declared. This measure was
favorably impacted by $7.1 million of after-tax unrealized gains
arising from fixed maturity securities (which are reflected on the
balance sheet) and $15.3 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 $45.41 increased by 5.0% during the first half
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 second quarter of
2022, unless noted otherwise).
Employers Segment
The Employers segment reported net income before income taxes of
$46.6 million versus a net loss before taxes of $11.6 million.
Highlights include the following:
– Underwriting income of $22.4 million versus
$12.5 million; – Combined ratio of 87.2% versus 92.4%; – Earned
premium of $175.5 million versus $164.6 million; – Calendar year
loss and LAE ratio of 63.4% versus 63.9%; – Commission expense
ratio of 13.4% versus 14.4%; – Underwriting expense ratio of 21.7%
versus 20.2%; – Net investment income of $24.1 million versus $18.7
million; and – Net realized and unrealized gains (losses) on
investments reflected on the income statement of $11.3 million
versus $(42.8) million.
Cerity Segment
The Cerity segment reported a net loss before income taxes of
$1.7 million versus a net loss of $3.1 million.
Highlights include the following:
– Underwriting loss of $3.4 million versus
$3.0 million; – Earned premium of $1.6 million versus $0.6 million;
– Net investment income of $1.7 million versus $0.8 million; and –
Net realized and unrealized gains (losses) on investments reflected
on the income statement of zero versus $(0.9) million.
Corporate and Other
Corporate and Other activities reported a net loss before income
taxes of $1.1 million versus $(6.7) million.
Highlights include the following:
– LPT amortization of $2.0 million, which
served to reduce losses and LAE, versus $2.1 million; – Net
investment income of $1.0 million versus $0.5 million; – Net
realized and unrealized losses on investments reflected on the
income statement of zero versus $(6.4) million; and – General and
administrative expenses of $4.0 million versus $2.8 million.
Third Quarter 2023 Dividend Declaration
Today the Board of Directors declared a regular quarterly
dividend of $0.28 per share. The dividend is payable on August 23,
2023 to stockholders of record as of August 9, 2023.
Stock Repurchases and New Stock Repurchase
Authorization
During the second quarter of 2023, the Company repurchased
935,250 shares of its common stock at an average price of $37.90
per share.
Today the Board of Directors authorized a new stock repurchase
program to allow for repurchases of up to $50.0 million of our
common stock from July 31, 2023 through December 31, 2024. The new
program replaces a similar program that was scheduled to expire on
December 31, 2023, but whose remaining repurchase authorization had
been exhausted.
Earnings Conference Call and Webcast
The Company will review these financial results via a conference
call and webcast on Thursday, July 27, 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, labor
market expectations, catastrophic events or geo-political
conditions, legislative or regulatory actions or court decisions
taken in response to the COVID-19 pandemic or otherwise, 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. Second 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
Six Months Ended
June 30,
June 30,
2023
2022
% change
2023
2022
% change
Selected financial highlights:
Gross premiums written
$
198.4
$
179.4
11
%
$
393.3
$
351.8
12
%
Net premiums written
196.6
178.1
10
389.7
348.5
12
Net premiums earned
177.1
165.2
7
349.8
315.4
11
Net investment income
26.8
20.0
34
54.4
39.1
39
Net income (loss) before impact of the
LPT(1)
32.9
(17.7
)
286
54.5
(22.0
)
348
Adjusted net income(1)
31.4
21.9
43
47.9
31.2
54
Net income (loss) before income taxes
43.8
(21.4
)
305
72.8
(23.8
)
406
Net income (loss)
34.9
(15.6
)
324
58.5
(17.8
)
429
Total Comprehensive income (loss)
19.5
(82.7
)
124
66.9
(173.1
)
139
Total assets
3,615.6
3,685.5
(2
)
Stockholders' equity
951.7
977.5
(3
)
Stockholders' equity including the
Deferred Gain(2)
1,053.8
1,087.7
(3
)
Adjusted stockholders' equity(2)
1,184.3
1,182.4
—
Annualized adjusted return on
stockholders' equity(3)
10.6
%
7.2
%
47
%
8.1
%
5.1
%
59
%
Amounts per share:
Cash dividends declared per share
$
0.28
$
1.26
(78
)%
$
0.54
$
1.51
(64
)%
Earnings (loss) per diluted share(4)
1.30
(0.56
)
332
2.16
(0.65
)
432
Earnings (loss) per diluted share before
impact of the LPT(4)
1.23
(0.64
)
292
2.01
(0.80
)
351
Adjusted earnings per diluted share(4)
1.17
0.79
48
1.77
1.12
58
Book value per share(2)
36.49
35.70
2
Book value per share including the
Deferred Gain(2)
40.41
39.72
2
Adjusted book value per share(2)
45.41
43.18
5
Financial information by
Segment(5):
Net income (loss) before income taxes
Employers
$
46.6
$
(11.6
)
502
%
$
76.7
$
(9.6
)
899
Cerity
(1.7
)
(3.1
)
45
(3.9
)
(5.7
)
32
Corporate and Other
(1.1
)
(6.7
)
84
—
(8.5
)
100
(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
June 30, 2023
December 31,
2022
ASSETS
Investments, cash and cash equivalents
$
2,538.2
$
2,658.2
Accrued investment income
18.5
19.0
Premiums receivable, net
352.3
305.9
Reinsurance recoverable, net of allowance,
on paid and unpaid losses and LAE
442.1
451.3
Deferred policy acquisition costs
55.6
48.3
Deferred income tax asset, net
55.6
62.7
Contingent commission receivable—LPT
Agreement
13.9
13.9
Other assets
139.4
157.4
Total assets
$
3,615.6
$
3,716.7
LIABILITIES
Unpaid losses and LAE
$
1,927.2
$
1,960.7
Unearned premiums
378.5
339.5
Commissions and premium taxes payable
56.8
58.2
Deferred Gain
102.1
106.1
FHLB Advances(1)
105.7
182.5
Other liabilities
93.6
125.5
Total liabilities
$
2,663.9
$
2,772.5
STOCKHOLDERS' EQUITY
Common stock and additional paid-in
capital
$
417.7
$
415.2
Retained earnings
1,339.4
1,295.6
Accumulated other comprehensive loss
(130.5
)
(138.9
)
Treasury stock, at cost
(674.9
)
(627.7
)
Total stockholders’ equity
951.7
944.2
Total liabilities and stockholders’
equity
$
3,615.6
$
3,716.7
Stockholders' equity including the
Deferred Gain (2)
$
1,053.8
$
1,050.3
Adjusted stockholders' equity (2)
1,184.3
1,189.2
Book value per share (2)
$
36.49
$
34.76
Book value per share including the
Deferred Gain(2)
40.41
38.67
Adjusted book value per share (2)
45.41
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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenues:
Net premiums earned
$
177.1
$
165.2
$
349.8
$
315.4
Net investment income
26.8
20.0
54.4
39.1
Net realized and unrealized gains (losses)
on investments(1)
11.3
(50.1
)
17.7
(67.4
)
Other income (loss)
—
0.2
(0.2
)
0.2
Total revenues
215.2
135.3
421.7
287.3
Expenses:
Losses and LAE incurred
(90.5
)
(93.3
)
(197.9
)
(187.5
)
Commission expense
(23.6
)
(23.7
)
(47.1
)
(44.6
)
Underwriting and general and
administrative expenses
(46.0
)
(39.4
)
(90.3
)
(78.6
)
Interest and financing expenses
(1.9
)
(0.3
)
(4.2
)
(0.4
)
Other expenses
(9.4
)
—
(9.4
)
—
Total expenses
(171.4
)
(156.7
)
(348.9
)
(311.1
)
Net income (loss) before income taxes
43.8
(21.4
)
72.8
(23.8
)
Income tax (expense) benefit
(8.9
)
5.8
(14.3
)
6.0
Net income (loss)
34.9
(15.6
)
58.5
(17.8
)
Unrealized AFS investment (losses) gains
arising during the period, net of tax(2)
(15.5
)
(73.5
)
7.1
(161.9
)
Reclassification adjustment for net
realized AFS investment losses in net income, net of tax(2)
0.1
6.4
1.3
6.6
Total comprehensive income
(loss)
$
19.5
$
(82.7
)
$
66.9
$
(173.1
)
Net income (loss)
$
34.9
$
(15.6
)
$
58.5
$
(17.8
)
Amortization of the Deferred Gain -
losses
(1.6
)
(1.7
)
(3.2
)
(3.4
)
Amortization of the Deferred Gain -
contingent commission
(0.4
)
(0.4
)
(0.8
)
(0.8
)
Net income (loss) before impact of the
LPT Agreement (3)
32.9
(17.7
)
54.5
(22.0
)
Net realized and unrealized (gains) losses
on investments
(11.3
)
50.1
(17.7
)
67.4
Lease termination and asset impairment
charges
9.4
—
9.4
—
Income tax expense (benefit) related to
items excluded from Net income or loss
0.4
(10.5
)
1.7
(14.2
)
Adjusted net income
$
31.4
$
21.9
$
47.9
$
31.2
(1) Includes net realized and unrealized
gains (losses) on equity securities and other investments of $11.4
million and $(42.0) million for the three months ended June 30,
2023 and 2022, respectively, and $19.4 million and $(59.0) million
for the six months ended June 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 June 30,
2023
Gross premiums written
$
196.1
$
2.3
$
—
$
198.4
Net premiums written
194.3
2.3
—
196.6
Net premiums earned
A
175.5
1.6
—
177.1
Net investment income
24.1
1.7
1.0
26.8
Net realized and unrealized gains on
investments
11.3
—
—
11.3
Total revenues
210.9
3.3
1.0
215.2
Losses and LAE incurred (2)
B
(91.5
)
(1.0
)
2.0
(90.5
)
Commission expense
C
(23.6
)
—
—
(23.6
)
Underwriting and general and
administrative expenses
D
(38.0
)
(4.0
)
(4.0
)
(46.0
)
Interest and financing expenses
(1.8
)
—
(0.1
)
(1.9
)
Other expenses
(9.4
)
—
—
(9.4
)
Total expenses
(164.3
)
(5.0
)
(2.1
)
(171.4
)
Net income (loss) before income
taxes
$
46.6
$
(1.7
)
$
(1.1
)
$
43.8
Underwriting income (loss)
A+B+C+D
22.4
(3.4
)
Loss and LAE expense ratio:
Current year
63.4
%
n/m
Prior years
(11.3
)
—
Loss and LAE ratio
52.1
n/m
Commission expense ratio
13.4
n/m
Underwriting expense ratio
21.7
n/m
Combined ratio
87.2
%
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 June 30,
2022
Gross premiums written
$
178.5
$
0.9
$
—
$
179.4
Net premiums written
177.2
0.9
—
178.1
Net premiums earned
A
164.6
0.6
—
165.2
Net investment income
18.7
0.8
0.5
20.0
Net realized and unrealized losses on
investments
(42.8
)
(0.9
)
(6.4
)
(50.1
)
Other income
0.2
—
—
0.2
Total revenues
140.7
0.5
(5.9
)
135.3
Losses and LAE incurred (2)
B
(95.1
)
(0.3
)
2.1
(93.3
)
Commission expense
C
(23.7
)
—
—
(23.7
)
Underwriting and general and
administrative expenses
D
(33.3
)
(3.3
)
(2.8
)
(39.4
)
Interest and financing expenses
(0.2
)
—
(0.1
)
(0.3
)
Total expenses
(152.3
)
(3.6
)
(0.8
)
(156.7
)
Net loss before income taxes
$
(11.6
)
$
(3.1
)
$
(6.7
)
$
(21.4
)
Underwriting income (loss)
A+B+C+D
$
12.5
$
(3.0
)
Loss and LAE expense ratio:
Current year
63.9
%
n/m
Prior years
(6.1
)
—
Loss and LAE ratio
57.8
n/m
Commission expense ratio
14.4
n/m
Underwriting expense ratio
20.2
n/m
Combined ratio
92.4
%
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
Six Months Ended June 30, 2023
Gross premiums written
$
390.3
$
3.0
$
—
$
393.3
Net premiums written
386.7
3.0
—
389.7
Net premiums earned
A
346.8
3.0
—
349.8
Net investment income
48.9
3.4
2.1
54.4
Net realized and unrealized gains on
investments
16.9
0.2
0.6
17.7
Other (loss) income
(0.2
)
—
—
(0.2
)
Total revenues
412.4
6.6
2.7
421.7
Losses and LAE incurred (2)
B
(200.0
)
(1.9
)
4.0
(197.9
)
Commission expense
C
(47.0
)
(0.1
)
—
(47.1
)
Underwriting and general and
administrative expenses
D
(75.3
)
(8.5
)
(6.5
)
(90.3
)
Interest and financing expenses
(4.0
)
—
(0.2
)
(4.2
)
Other expenses
(9.4
)
—
—
(9.4
)
Total expenses
(335.7
)
(10.5
)
(2.7
)
(348.9
)
Net income (loss) before income
taxes
$
76.7
$
(3.9
)
$
—
$
72.8
Underwriting income (loss)
A+B+C+D
24.5
(7.5
)
Loss and LAE expense ratio:
Current year
63.4
%
n/m
Prior years
(5.7
)
—
Loss and LAE ratio
57.7
n/m
Commission expense ratio
13.6
n/m
Underwriting expense ratio
21.7
n/m
Combined ratio
93.0
%
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
Six Months Ended June 30, 2022
Gross premiums written
$
349.7
$
2.1
$
—
$
351.8
Net premiums written
346.4
2.1
—
348.5
Net premiums earned
A
314.2
1.2
—
315.4
Net investment income
36.3
1.6
1.2
39.1
Net realized and unrealized losses on
investments
(58.4
)
(1.3
)
(7.7
)
(67.4
)
Other income
0.2
—
—
0.2
Total revenues
292.3
1.5
(6.5
)
287.3
Losses and LAE incurred (2)
B
(191.0
)
(0.7
)
4.2
(187.5
)
Commission expense
C
(44.6
)
—
—
(44.6
)
Underwriting and general and
administrative expenses
D
(66.1
)
(6.5
)
(6.0
)
(78.6
)
Interest and financing expenses
(0.2
)
—
(0.2
)
(0.4
)
Total expenses
(301.9
)
(7.2
)
(2.0
)
(311.1
)
Net loss before income taxes
$
(9.6
)
$
(5.7
)
$
(8.5
)
$
(23.8
)
Underwriting income (loss)
A+B+C+D
$
12.5
$
(6.0
)
Loss and LAE expense ratio:
Current year
64.0
%
n/m
Prior years
(3.2
)
—
Loss and LAE ratio
60.8
n/m
Commission expense ratio
14.2
n/m
Underwriting expense ratio
21.0
n/m
Combined ratio
96.0
%
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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net income (loss)
A
$
34.9
$
(15.6
)
$
58.5
$
(17.8
)
Impact of the LPT Agreement
(2.0
)
(2.1
)
(4.0
)
(4.2
)
Net realized and unrealized (gains) losses
on investments
(11.3
)
50.1
(17.7
)
67.4
Lease termination and asset impairment
charges
9.4
—
9.4
—
Income tax expense (benefit) related to
items excluded from Net income
0.4
(10.5
)
1.7
(14.2
)
Adjusted net income (1)
B
31.4
21.9
47.9
31.2
Stockholders' equity - end of period
$
951.7
$
977.5
$
951.7
$
977.5
Stockholders' equity - beginning of
period
974.1
1,109.3
944.2
1,213.1
Average stockholders' equity
C
962.9
1,043.4
948.0
1,095.3
Stockholders' equity - end of period
$
951.7
$
977.5
$
951.7
$
977.5
Deferred Gain - end of period
102.1
110.2
102.1
110.2
Accumulated other comprehensive loss - end
of period
165.2
119.8
165.2
119.8
Income taxes related to accumulated other
comprehensive loss - end of period
(34.7
)
(25.1
)
(34.7
)
(25.1
)
Adjusted stockholders' equity - end of
period
1,184.3
1,182.4
1,184.3
1,182.4
Adjusted stockholders' equity - beginning
of period
1,193.3
1,249.2
1,189.2
1,266.9
Average adjusted stockholders' equity
(1)
D
1,188.8
1,215.8
1,186.8
1,224.7
Return on stockholders' equity
A / C
3.6
%
(1.5
)%
6.2
%
(1.6
)%
Annualized return on stockholders'
equity
14.5
(6.0
)
12.3
(3.3
)
Adjusted return on stockholders' equity
(1)
B / D
2.6
%
1.8
%
4.0
%
2.5
%
Annualized adjusted return on
stockholders' equity (1)
10.6
7.2
8.1
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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Unpaid losses and LAE at beginning of
period
$
1,953.7
$
1,981.9
$
1,960.7
$
1,981.2
Reinsurance recoverable, excluding CECL
allowance, on unpaid losses and LAE
440.3
471.7
445.4
476.9
Net unpaid losses and LAE at beginning of
period
1,513.4
1,510.2
1,515.3
1,504.3
Losses and LAE incurred:
Current year losses
112.2
105.4
221.8
201.7
Prior year losses on voluntary
business
(20.0
)
(9.6
)
(20.0
)
(9.6
)
Prior year losses on involuntary
business
0.3
(0.4
)
0.1
(0.4
)
Total losses incurred
92.5
95.4
201.9
191.7
Losses and LAE paid:
Current year losses
26.5
18.5
32.1
23.1
Prior year losses
88.4
76.7
194.1
162.5
Total paid losses
114.9
95.2
226.2
185.6
Net unpaid losses and LAE at end of
period
1,491.0
1,510.4
1,491.0
1,510.4
Reinsurance recoverable, excluding CECL
allowance, on unpaid losses and LAE
436.2
462.4
436.2
462.4
Unpaid losses and LAE at end of period
$
1,927.2
$
1,972.8
$
1,927.2
$
1,972.8
Total losses and LAE shown in the above
table exclude amortization of the Deferred Gain, which totaled $2.0
million and $2.1 million for the three months ended June 30, 2023
and 2022, respectively, and $4.0 million and $4.2 million for the
six months ended June 30, 2023 and 2022, respectively.
EMPLOYERS HOLDINGS,
INC.
Consolidated Investment
Portfolio (unaudited)
$ in millions
June 30, 2023
December 31, 2022
Investment Positions:
Cost or Amortized Cost
(1)
Net Unrealized Gain
(Loss)
Fair Value
%
Fair Value
%
Fixed maturity securities
$
2,331.4
$
(165.2
)
$
2,161.9
85
%
$
2,186.3
82
%
Equity securities
137.7
72.5
210.2
8
203.7
8
Short-term investments
16.3
—
16.3
1
119.1
4
Other invested assets
75.0
8.4
83.4
3
59.7
2
Cash and cash equivalents
66.2
—
66.2
3
89.2
3
Restricted cash and cash equivalents
0.2
—
0.2
—
0.2
—
Total investments and cash
$
2,626.8
$
(84.3
)
$
2,538.2
100
%
$
2,658.2
100
%
Breakout of Fixed Maturity
Securities:
U.S. Treasuries and agencies
$
95.5
$
(4.6
)
$
90.9
4
%
$
92.9
4
%
States and municipalities
325.5
(8.0
)
317.5
15
317.6
15
Corporate securities
1,019.3
(89.0
)
926.5
43
868.1
40
Mortgage-backed securities
453.6
(49.5
)
404.1
19
415.3
19
Asset-backed securities
102.6
(6.3
)
96.3
4
66.1
3
Collateralized loan obligations
210.9
(4.6
)
206.3
10
260.9
12
Bank loans and other
124.0
(3.2
)
120.3
6
165.4
8
Total fixed maturity securities
$
2,331.4
$
(165.2
)
$
2,161.9
100
%
$
2,186.3
100
%
Weighted average book yield
4.1
%
3.9
%
Average credit quality (S&P)
A
A
Duration
3.9
3.9
(1) Amortized cost excludes allowance for
current expected credit losses (CECL) of $4.3 million.
EMPLOYERS HOLDINGS,
INC.
Book Value Per Share
(unaudited)
$ in millions, except per
share amounts
June 30, 2023
March 31, 2023
December 31,
2022
June 30, 2022
Numerators:
Stockholders' equity
A
$
951.7
$
974.1
$
944.2
$
977.5
Plus: Deferred Gain
102.1
104.1
106.1
110.2
Stockholders' equity including the
Deferred Gain (1)
B
1,053.8
1,078.2
1,050.3
1,087.7
Accumulated other comprehensive loss
165.2
145.7
175.8
119.8
Income taxes related to accumulated other
comprehensive loss
(34.7
)
(30.6
)
(36.9
)
(25.1
)
Adjusted stockholders' equity
(1)
C
$
1,184.3
$
1,193.3
$
1,189.2
$
1,182.4
Denominator (shares
outstanding)
D
26,078,813
27,001,967
27,160,748
27,383,132
Book value per share (1)
A / D
$
36.49
$
36.08
$
34.76
$
35.70
Book value per share including the
Deferred Gain(1)
B / D
40.41
39.93
38.67
39.72
Adjusted book value per share (1)
C / D
45.41
44.19
43.78
43.18
YTD Change in: (2)
Book value per share
6.5
%
(14.9
)%
Book value per share including the
Deferred Gain
5.9
(13.8
)
Adjusted book value per share
5.0
(2.1
)
(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 $0.54 and
$1.51 for the six months ended June 30, 2023 and 2022,
respectively.
EMPLOYERS HOLDINGS,
INC.
Earnings Per Share
(unaudited)
$ in millions, except per
share amounts
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Numerators:
Net income (loss)
A
$
34.9
$
(15.6
)
$
58.5
$
(17.8
)
Impact of the LPT Agreement
(2.0
)
(2.1
)
(4.0
)
(4.2
)
Net income (loss) before impact of the
LPT (1)
B
32.9
(17.7
)
54.5
(22.0
)
Net realized and unrealized (gains) losses
on investments
(11.3
)
50.1
(17.7
)
67.4
Lease termination and asset impairment
charges
9.4
—
9.4
—
Income tax expense (benefit) related to
items excluded from Net income
0.4
(10.5
)
1.7
(14.2
)
Adjusted net income (1)
C
$
31.4
$
21.9
$
47.9
$
31.2
Denominators:
Average common shares outstanding
(basic)
D
26,691,652
27,650,277
26,932,897
27,585,447
Average common shares outstanding
(diluted)
E
26,803,340
27,782,921
27,096,669
27,789,087
Earnings (loss) per share:
Basic
A / D
$
1.31
$
(0.56
)
$
2.17
$
(0.65
)
Diluted (2)
A / E
1.30
(0.56
)
2.16
(0.65
)
Earnings (loss) per share before impact
of the LPT: (1)
Basic
B / D
$
1.23
$
(0.64
)
$
2.02
$
(0.80
)
Diluted (2)
B / E
1.23
(0.64
)
2.01
(0.80
)
Adjusted earnings per share:
(1)
Basic
C / D
$
1.18
$
0.79
$
1.78
$
1.13
Diluted
C / E
1.17
0.79
1.77
1.12
(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/20230726558887/en/
Company contact: Mike Paquette (775) 327-2562 or
mpaquette@employers.com
Investor relations contact: Karin Daly, The Equity Group Inc.
(212) 836-9623 or kdaly@equityny.com
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