Market Overview

Employers Holdings, Inc. Reports Second Quarter 2018 Results

Share:
  • Net income of $42.5 million ($1.28 per diluted share), adjusted net
    income of $31.2 million ($0.94 per diluted share).
  • Gross premiums written of $186.4 million, up 1% year-over-year,
  • Net earned premiums of $178.0 million, up 4% year-over-year.
  • Underwriting income of $25.6 million versus $11.5 million a year ago.
  • Combined ratio of 85.6%, combined ratio before the impact of the LPT
    of 89.5%.

Employers Holdings, Inc. ("EHI" or the "Company") (NYSE:EIG)
today reported the following for the second quarter of 2018: (i) net
income of $42.5 million ($1.28 per diluted share); (ii) net income
before the impact of the LPT of $35.6 million ($1.07 per diluted share);
and (iii) adjusted net income of $31.2 million ($0.94 per diluted share).

The Company's adjusted net income for the second quarter of 2018
increased $11.5 million year-over-year. This increase primarily
reflects: (i) strong underwriting results highlighted by a 62.5% current
accident year loss ratio and $16.5 million of favorable prior year loss
reserve development, and (ii) a reduction in our effective income tax
rate from 23.9% to 17.2%, 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 second quarter of 2018 increased by $17.7 million and $13.9 million,
respectively, year-over-year. These second quarter 2018 net income
measures were each favorably impacted by the items previously mentioned,
as well as $2.8 million of after tax unrealized investment gains
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 its net income or net income before the impact of the LPT.

The Company's book value per share of $29.20, book value per share
including the Deferred Gain of $33.92 and adjusted book value per share
of $34.33 increased by 1.8%, 0.7%, and 12.8% during the first half of
2018, respectively, each computed after taking into account dividends
declared. The Company's book value per share and book value per share
including the Deferred Gain at June 30, 2018 were each adversely
impacted by $46.7 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:
"EMPLOYERS has performed well throughout the first half of 2018. We grew
written premiums by 4%, lowered our current accident year loss provision
and recognized favorable development on our prior year loss reserves.

"As a result of our nearly-completed buildout of our nationwide
platform, an enhanced sales force and greater leveraging of our
partnerships and alliances, we were able to increase our top line
despite declining rates in nearly all of the markets in which we do
business. Loss costs and frequency trends continue to be favorable,
despite highly competitive market conditions."

Summary of Second Quarter 2018 Operating
Results

(All comparisons vs. second quarter 2017, unless
noted otherwise).

Gross premiums written were $186.4 million, an increase of 1%. The
increase was due primarily to new business writings, partially offset by
rate declines on renewal business. Net earned premiums were $178.0
million, an increase of 4% year-over-year.

The loss and LAE ratio before the impact of the LPT of 53.2% decreased
10.4 percentage points reflecting observed favorable paid loss trends,
including those resulting from our 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 9.3 percentage points of the decline.

The commission expense ratio of 13.8% increased 1.3 percentage points,
primarily as a result of an increase in the percentage of business
produced by our partnerships and alliances, which is subject to a higher
commission rate, as well as an increase in projected 2018 agency
incentive commissions.

The underwriting and other operating expense ratio of 22.5% increased
3.5 percentage points due largely to expenses associated with the
development and implementation of new technologies and capabilities.

Net investment income of $20.3 million increased 12%, primarily as a
result of higher pre-tax book yields.

The income tax expense was $8.8 million (a 17.2% effective rate) versus
$7.8 million (a 23.9% effective rate). The decrease in the effective
rate is due to a reduction in the statutory Federal income tax rate from
35% to 21% as a result of the 2017 Tax Cuts and Job Act.

Stockholders' Equity including the Deferred
Gain, Second Quarter 2018 Dividend Declaration

Stockholders' equity including the Deferred Gain was $1,111.2 million,
an increase of 1.8% from March 31, 2018 and 4.0% from June 30, 2017.

On July 25, 2018, the Board of Directors declared a third quarter 2018
dividend of $0.20 per share. The dividend is payable on August 22, 2018
to stockholders of record as of August 8, 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, July 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 6596627.

The Company provides its filings with the Securities and Exchange
Commission and its investor presentations on its website at www.employers.com.

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.
Second Quarter 2018
Financial
Supplement

 

EMPLOYERS HOLDINGS, INC.

Table of Contents

 
Page  
 

1

Consolidated Financial Highlights
 

2

Summary Consolidated Balance Sheets
 

3

Summary Consolidated Income Statements
 

4

Return on Equity
 

5

Combined Ratios
 

6

Roll-forward of Unpaid Losses and LAE
 

7

Consolidated Investment Portfolio
 

8

Book Value Per Share
 

9

Earnings Per Share
 

10

Non-GAAP Financial Measures
 

EMPLOYERS HOLDINGS, INC.

Consolidated Financial Highlights (unaudited)

$ in millions, except per share amounts

 
  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017   % change 2018   2017   % change
Selected financial highlights:
Gross premiums written $ 186.4 $ 184.5 1 % $ 398.0 $ 382.1 4 %
Net premiums written 185.0 183.0 1 395.2 379.1 4
Net premiums earned 178.0 171.7 4 354.6 347.1 2
Net investment income 20.3 18.2 12 39.7 36.9 8
Underwriting income(1) 25.6 11.5 123 44.0 20.5 115
Net income before impact of the LPT(1) 35.6 21.7 64 58.6 42.0 40
Adjusted net income(1) 31.2 19.7 58 60.6 38.6 57
Net income 42.5 24.8 71 68.1 48.0 42
Comprehensive income 31.2 32.5 (4 ) 21.4 63.8 (66 )
Total assets 3,868.5 3,824.8 1
Stockholders' equity 956.5 899.2 6
Stockholders' equity including the Deferred Gain(2) 1,111.2 1,068.1 4
Adjusted stockholders' equity(2) 1,124.5 977.8 15
Annualized adjusted return on stockholders' equity(3) 11.3 % 8.1 % 40 % 11.4 % 8.0 % 43 %
Amounts per share:
Cash dividends declared per share $ 0.20 $ 0.15 33 % $ 0.40 $ 0.30 33 %
Earnings per diluted share(4) 1.28 0.75 71 2.05 1.46 40
Earnings per diluted share before impact of the LPT(4) 1.07 0.66 62 1.76 1.27 39
Adjusted earnings per diluted share(4) 0.94 0.60 57 1.82 1.17 56
Book value per share(2) 29.20 27.74 5
Book value per share including the Deferred Gain(2) 33.92 32.95 3
Adjusted book value per share(2) 34.33 30.17 14
Combined ratio before impact of the LPT:(5)
Loss and loss adjustment expense ratio:
Current year 62.5 % 63.8 % 62.5 % 63.8 %
Prior year (9.3 ) (0.2 ) (8.2 ) (0.1 )
Loss and loss adjustment expense ratio 53.2 % 63.6 % 54.3 % 63.7 %
Commission expense ratio 13.8 12.5 13.6 12.4
Underwriting and other operating expenses ratio 22.5   19.0   22.3   19.8  
Combined ratio before impact of the LPT 89.5 % 95.1 % 90.3 % 95.8 %
(1)   See Page 3 for calculations and Page 10 for information regarding
our use of Non-GAAP Financial Measures.
(2) See Page 8 for calculations and Page 10 for information regarding
our use of Non-GAAP Financial Measures.
(3) See Page 4 for calculations and Page 10 for information regarding
our use of Non-GAAP Financial Measures.
(4) See Page 9 for calculations and Page 10 for information regarding
our use of Non-GAAP Financial Measures.
(5) See Page 5 for calculations and Page 10 for information regarding
our use of Non-GAAP Financial Measures.
 

EMPLOYERS HOLDINGS, INC.

Summary Consolidated Balance Sheets (unaudited)

$ in millions, except per share amounts

 
 

June 30,

 

December 31,

2018

2017

ASSETS
Investments, cash and cash equivalents $     2,752.6 $ 2,752.0
Accrued investment income 18.6 19.6
Premiums receivable, net 355.6 326.7
Reinsurance recoverable on paid and unpaid losses and LAE 520.1 544.2
Deferred policy acquisition costs 51.7 45.8
Deferred income taxes, net 24.4 28.7
Contingent commission receivable—LPT Agreement 32.0 31.4
Other assets 113.5   91.7  
Total assets $     3,868.5   $ 3,840.1  
 
LIABILITIES
Unpaid losses and LAE $ 2,227.9 $ 2,266.1
Unearned premiums 360.2 318.3
Commissions and premium taxes payable 58.9 55.3
Deferred Gain 154.7 163.6
Notes payable 20.0 20.0
Other liabilities 90.3   69.1  
Total liabilities $ 2,912.0 $ 2,892.4
 
STOCKHOLDERS' EQUITY
Common stock and additional paid-in capital $ 383.0 $ 381.8
Retained earnings(2) 970.8 842.2
Accumulated other comprehensive (loss) income, net(2) (13.3 ) 107.4
Treasury stock, at cost (384.0 ) (383.7 )
Total stockholders' equity 956.5   947.7  
Total liabilities and stockholders' equity $     3,868.5   $ 3,840.1  
         
Stockholders' equity including the Deferred Gain (1) $ 1,111.2 $ 1,111.3
Adjusted stockholders' equity (1)   1,124.5     1,003.9  
Book value per share (1) $ 29.20 $ 29.07
Book value per share including the Deferred Gain(1) 33.92 34.09
Adjusted book value per share (1)   34.33     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   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Underwriting revenues:
Gross premiums written $ 186.4 $ 184.5 $ 398.0 $ 382.1
Premiums ceded (1.4 ) (1.5 ) (2.8 ) (3.0 )
Net premiums written 185.0 183.0 395.2 379.1
Net premiums earned 178.0 171.7 354.6 347.1
Underwriting expenses:
Losses and LAE incurred (87.8 ) (106.1 ) (183.2 ) (215.0 )
Commission expense (24.5 ) (21.5 ) (48.2 ) (43.0 )
Underwriting and other operating expenses (40.1 ) (32.6 ) (79.2 ) (68.6 )
Underwriting income 25.6 11.5 44.0 20.5
Net investment income 20.3 18.2 39.7 36.9
Net realized and unrealized gains (losses) on investments(2) 5.7 1.1 (2.4 ) 3.3
Gain on redemption of notes payable 2.1 2.1
Other income 0.1 0.1 0.1 0.1
Interest and financing expenses (0.4 ) (0.4 ) (0.7 ) (0.8 )
Income tax expense (8.8 ) (7.8 ) (12.6 ) (14.1 )
Net income 42.5 24.8 68.1 48.0
Unrealized AFS investment (losses) gains arising during the period,
net of tax(3)
(11.3 ) 8.4 (47.1 ) 17.9
Reclassification adjustment for realized AFS investment losses
(gains) in net income, net of tax(3)
  (0.7 ) 0.4   (2.1 )
Comprehensive income   $ 31.2     $ 32.5     $ 21.4     $ 63.8  
Net Income $ 42.5 $ 24.8 $ 68.1 $ 48.0
Amortization of the Deferred Gain - losses (3.6 ) (2.5 ) (5.7 ) (4.9 )
Amortization of the Deferred Gain - contingent commission (0.6 ) (0.6 ) (1.1 ) (1.1 )
LPT reserve adjustment (2.2 ) (2.2 )
LPT contingent commission adjustments (0.5 )   (0.5 )  
Net income before impact of the LPT Agreement (1) 35.6 21.7 58.6 42.0
Net realized and unrealized (gains) losses on investments (5.7 ) (1.1 ) 2.4 (3.3 )
Gain on redemption of notes payable (2.1 ) (2.1 )
Amortization of intangibles 0.1 0.1 0.1 0.1
Income tax expense (benefit) related to items excluded from Net
income
  1.2     1.1     (0.5 )   1.9  
Adjusted net income (1)   $ 31.2     $ 19.7     $ 60.6     $ 38.6  
(1)   See Page 10 regarding our use of Non-GAAP Financial Measures.
(2) Includes $3.5 million and $(9.4) million of unrealized gains
(losses) on equity securities for the three and six months ended
June 30, 2018, respectively.
(3) AFS = Available for Sale securities.
 

EMPLOYERS HOLDINGS, INC.

Return on Equity (unaudited)

$ in millions, except per share amounts

 
    Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
 
Net income A $ 42.5 $ 24.8 $ 68.1 $ 48.0
Impact of the LPT Agreement (6.9 ) (3.1 ) (9.5 ) (6.0 )
Net realized and unrealized (gains) losses on investments (5.7 ) (1.1 ) 2.4 (3.3 )
Gain on redemption of notes payable (2.1 ) (2.1 )
Amortization of intangibles 0.1 0.1 0.1 0.1
Income tax expense (benefit) related to items excluded from Net
income
1.2   1.1   (0.5 ) 1.9  
Adjusted net income (1)   B   31.2     19.7     60.6     38.6  
 
Stockholders' equity - end of period $ 956.5 $ 899.2 $ 956.5 $ 899.2
 
Stockholders' equity - beginning of period 930.3 867.5 947.7 840.6
 
Average stockholders' equity   C   943.4     883.4     952.1     869.9  
 
Stockholders' equity - end of period $ 956.5 $ 899.2 $ 956.5 $ 899.2
Deferred Gain - end of period 154.7 168.9 154.7 168.9
Accumulated other comprehensive loss (income) - end of period 16.8 (138.9 ) 16.8 (138.9 )
Income taxes related to accumulated other comprehensive gains and
losses - end of period
(3.5 ) 48.6   (3.5 ) 48.6  
Adjusted stockholders' equity - end of period 1,124.5 977.8 1,124.5 977.8
Adjusted stockholders' equity - beginning of period 1,093.3   956.9   1,003.9   941.0  
Average adjusted stockholders' equity (1)   D   1,108.9     967.4     1,064.2     959.4  
 
Return on stockholders' equity A / C 4.5 % 2.8 % 7.2 % 5.5 %
Annualized return on stockholders' equity 18.0 11.2 14.3 11.0
 
Adjusted return on stockholders' equity (1) B / D 2.8 % 2.0 % 5.7 % 4.0 %
Annualized adjusted return on stockholders' equity (1)       11.3     8.1     11.4     8.0  
(1)   See Page 10 for information regarding our use of Non-GAAP Financial
Measures.
 

EMPLOYERS HOLDINGS, INC.

Combined Ratios (unaudited)

$ in millions, except per share amounts

 
    Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Net premiums earned A $ 178.0 $ 171.7 $ 354.6 $ 347.1
Losses and LAE incurred B 87.8 106.1 183.2 215.0
Amortization of the Deferred Gain - losses 3.6 2.5 5.7 4.9
Amortization of the Deferred Gain - contingent commission 0.6 0.6 1.1 1.1
LPT reserve adjustment 2.2 2.2
LPT contingent commission adjustments 0.5     0.5    
Losses and LAE before impact of the LPT (1) C 94.7 109.2 192.7 221.0
Prior accident year favorable loss reserve development (16.5 ) (0.3 ) (28.9 ) (0.3 )
Losses and LAE before impact of the LPT - current accident year D $ 111.2   $ 109.5   $ 221.6   $ 221.3  
Commission expense E $ 24.5 $ 21.5 $ 48.2 $ 43.0
Underwriting and other operating expenses   F   40.1     32.6     79.2     68.6  
Combined ratio:
Loss and LAE ratio B/A 49.3 % 61.8 % 51.7 % 61.9 %
Commission expense ratio E/A 13.8 12.5 13.6 12.4
Underwriting and other operating expenses ratio F/A 22.5   19.0   22.3   19.8  
Combined ratio       85.6 %   93.3 %   87.6 %   94.1 %
Combined ratio before impact of the LPT: (1)
Loss and LAE ratio before impact of the LPT C/A 53.2 % 63.6 % 54.3 % 63.7 %
Commission expense ratio E/A 13.8 12.5 13.6 12.4
Underwriting and other operating expenses ratio F/A 22.5   19.0   22.3   19.8  
Combined ratio before impact of the LPT       89.5 %   95.1 %   90.3 %   95.8 %
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 % 62.5 % 63.8 %
Commission expense ratio E/A 13.8 12.5 13.6 12.4
Underwriting and other operating expenses ratio F/A 22.5   19.0   22.3   19.8  
Combined ratio before impact of the LPT: current accident year       98.8 %   95.3 %   98.4 %   95.9 %
(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   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
 
Unpaid losses and LAE at beginning of period $ 2,258.1 $ 2,298.2 $ 2,266.1 $ 2,301.0
Reinsurance recoverable on unpaid losses and LAE 531.1   572.9   537.0   580.0  
Net unpaid losses and LAE at beginning of period 1,727.0   1,725.3   1,729.1   1,721.0  
Losses and LAE incurred:
Current year losses 111.2 109.4 221.6 221.3
Prior year losses on voluntary business (16.5 ) (28.5 )
Prior year losses on involuntary business   (0.3 ) (0.4 ) (0.3 )
Total losses incurred 94.7   109.1   192.7   221.0  
Losses and LAE paid:
Current year losses 20.0 17.0 25.9 21.7
Prior year losses 86.3   92.3   180.5   195.2  
Total paid losses 106.3   109.3   206.4   216.9  
Net unpaid losses and LAE at end of period 1,715.4 1,725.1 1,715.4 1,725.1
Reinsurance recoverable on unpaid losses and LAE 512.5   559.8   512.5   559.8  
Unpaid losses and LAE at end of period $ 2,227.9   $ 2,284.9   $ 2,227.9   $ 2,284.9  
 

Total losses and LAE shown in the above table exclude amortization of
the Deferred Gain, LPT Reserve Adjustments, and LPT Contingent
Commission Adjustments, which totaled $6.9 million and $3.1 million for
the three months ended June 30, 2018 and 2017, respectively, and $9.5
million and $6.0 million for the six months ended June 30, 2018 and
2017, respectively.

EMPLOYERS HOLDINGS, INC.

Consolidated Investment Portfolio (unaudited)

$ in millions

 

  June 30, 2018   December 31, 2017  

Cost or

   

Amortized

Net Unrealized

Investment Positions:

Cost

(Loss) Gain

Fair Value   % Fair Value   %  
Fixed maturities $ 2,418.0 $ (16.8 ) $ 2,401.2       87 % $ 2,463.4       90 %
Equity securities 119.9 84.2 204.1 7 210.3 8
Short-term investments 4.0
Cash and cash equivalents 146.3 146.3 5 73.3 3
Restricted cash and cash equivalents 1.0       1.0           1.0          
Total investments and cash $ 2,685.2   $ 67.4   $ 2,752.6         100 % $ 2,752.0         100 %
 
Breakout of Fixed Maturities:
U.S. Treasuries and Agencies $ 131.7 $ (0.8 ) $ 130.9 5 % $ 148.8 6 %
States and Municipalities 555.0 13.7 568.7 24 642.5 26
Corporate Securities 1,095.9 (16.4 ) 1,079.5 45 1,118.0 45
Mortgage-Backed Securities 550.0 (12.9 ) 537.1 22 495.3 20
Asset-Backed Securities 67.6 (0.3 ) 67.3 3 58.8 2
Other 17.8     (0.1 ) 17.7         1            
Total fixed maturities $ 2,418.0   $ (16.8 ) $ 2,401.2         100 % $ 2,463.4         100 %
   
Weighted average book yield 3.3% 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

 
   

June 30,

 

December 31,

 

June 30,

 

December 31,

2018

2017

2017

2016

Numerators:
Stockholders' equity A $ 956.5 $ 947.7 $ 899.2 $ 840.6
Plus: Deferred Gain 154.7   163.6   168.9   174.9  

Stockholders' equity including the Deferred Gain (1)

B 1,111.2 1,111.3 1,068.1 1,015.5
Accumulated other comprehensive loss (income) 16.8 (136.0 ) (138.9 ) (114.6 )
Income taxes related to accumulated other comprehensive gains and
losses
(3.5 ) 28.6   48.6   40.1  
Adjusted stockholders' equity (1) C $ 1,124.5   $ 1,003.9   $ 977.8   $ 941.0  
 
Denominator (shares outstanding) D 32,759,575 32,597,819 32,412,997 32,128,922
 
Book value per share (1) A / D $ 29.20 $ 29.07 $ 27.74 $ 26.16
Book value per share including the Deferred Gain(1) B / D 33.92 34.09 32.95 31.61
Adjusted book value per share (1) C / D 34.33 30.80 30.17 29.29
 
Cash dividends declared per share $ 0.40 $ 0.60 $ 0.30 $ 0.36
 
YTD Change in: (2)
Book value per share 1.8 % 7.2 %
Book value per share including the Deferred Gain 0.7 5.2
Adjusted book value per share 12.8 4.0
(1)  

See Page 10 for information regarding our use of Non-GAAP
Financial Measures.

(2)

Reflects the change in book value per share after taking into
account dividends declared in the period.

 

EMPLOYERS HOLDINGS, INC.

Earnings Per Share (unaudited)

$ in millions, except per share amounts

 
    Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Numerators:
Net income A $ 42.5 $ 24.8 $ 68.1 $ 48.0
Impact of the LPT Agreement (6.9 ) (3.1 ) (9.5 ) (6.0 )
Net income before impact of the LPT (1) B 35.6   21.7   58.6   42.0  
Net realized and unrealized (gains) losses on investments (5.7 ) (1.1 ) 2.4 (3.3 )
Gain on redemption of notes payable (2.1 ) (2.1 )
Amortization of intangibles 0.1 0.1 0.1 0.1
Income tax expense (benefit) related to items excluded from Net
income
1.2   1.1   (0.5 ) 1.9  
Adjusted net income (1) C $ 31.2   $ 19.7   $ 60.6   $ 38.6  
 
Denominators:
Average common shares outstanding (basic) D 32,880,023 32,469,137 32,843,448 32,398,858
Average common shares outstanding (diluted) E 33,222,706 32,992,598 33,259,759 32,982,928
 
Earnings per share:
Basic A / D $ 1.29 $ 0.76 $ 2.07 $ 1.48
Diluted A / E 1.28 0.75 2.05 1.46
 
Earnings per share before impact of the LPT: (1)
Basic B / D $ 1.08 $ 0.67 $ 1.78 $ 1.30
Diluted B / E 1.07 0.66 1.76 1.27
 
Adjusted earnings per share: (1)
Basic C / D $ 0.95 $ 0.61 $ 1.85 $ 1.19
Diluted C / E 0.94 0.60 1.82 1.17
(1)   See Page 10 for information regarding our use of Non-GAAP Financial
Measures.
 

Glossary of Financial Measures

Within this earnings release we present the following measures, each of
which are "non-GAAP financial measures." A reconciliation of these
measures to the Company's most directly comparable GAAP financial
measures is included herein. Management believes that these non-GAAP
measures are important to the Company's investors, analysts and other
interested parties who benefit from having an objective and consistent
basis for comparison with other companies within our industry.
Management further believes that these measures are more relevant than
comparable GAAP measures in evaluating our financial performance.

The LPT Agreement is a non-recurring transaction that does
not result in any significant 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), amortization of
intangible assets (net of tax) and gain on redemption of notes payable
(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.

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