Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Employers Holdings, Inc. | ex991_pressreleasex33117.htm |
| 8-K - 8-K - Employers Holdings, Inc. | earningsrelease8k_3312017.htm |
Exhibit 99.2
Employers Holdings, Inc.
First Quarter 2017
Financial Supplement
EMPLOYERS HOLDINGS, INC.
Table of Contents
EMPLOYERS HOLDINGS, INC.
Consolidated Financial Highlights (unaudited)
$ in millions, except per share amounts
Three Months Ended | |||||||||||
March 31, | |||||||||||
2017 | 2016* | % change | |||||||||
Selected financial highlights: | |||||||||||
Gross insurance premiums written | $ | 197.6 | $ | 190.7 | 4 | % | |||||
Net insurance premiums written | 196.1 | 188.7 | 4 | % | |||||||
Net insurance premiums earned | 175.3 | 172.6 | 2 | % | |||||||
Net investment income | 18.8 | 17.8 | 6 | % | |||||||
Underwriting income | 8.9 | 8.7 | 2 | % | |||||||
Net income before impact of the LPT1 | 20.3 | 18.7 | 9 | % | |||||||
Operating income1 | 18.9 | 17.8 | 6 | % | |||||||
Net income | 23.2 | 21.8 | 6 | % | |||||||
Comprehensive income | 31.2 | 41.6 | (25 | )% | |||||||
Total assets | 3,833.6 | 3,796.8 | 1 | % | |||||||
Stockholders' equity | 867.5 | 803.7 | 8 | % | |||||||
Stockholders' equity including deferred reinsurance gain2 | 1,039.4 | 990.1 | 5 | % | |||||||
Adjusted stockholders' equity2 | 956.9 | 886.7 | 8 | % | |||||||
Annualized operating return on adjusted stockholders' equity3 | 8.0 | % | 8.1 | % | (1 | )% | |||||
Amounts per share: | |||||||||||
Cash dividends declared per share | $ | 0.15 | $ | 0.09 | 67 | % | |||||
Net income per diluted share4 | 0.70 | 0.66 | 6 | % | |||||||
Net income before impact of the LPT per diluted share4 | 0.62 | 0.57 | 9 | % | |||||||
Operating income per diluted share4 | 0.57 | 0.54 | 6 | % | |||||||
GAAP book value per share2 | 26.88 | 24.74 | 9 | % | |||||||
Book value per share2 | 32.20 | 30.48 | 6 | % | |||||||
Adjusted book value per share2 | 29.65 | 27.30 | 9 | % | |||||||
Combined ratio before impact of the LPT:5 | |||||||||||
Loss and loss adjustment expense ratio: | |||||||||||
Current year | 63.8 | % | 64.1 | % | |||||||
Prior year | — | % | (0.1 | )% | |||||||
Loss and loss adjustment expense ratio | 63.8 | % | 64.0 | % | |||||||
Commission expense ratio | 12.3 | % | 11.8 | % | |||||||
Underwriting and other operating expense ratio | 20.4 | % | 21.0 | % | |||||||
Combined ratio before impact of the LPT | 96.6 | % | 96.8 | % | |||||||
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. | |||||||||||
*The Company adopted ASU Number 2016-9, Stock Compensation in the third quarter of 2016 with an effective date of January 1, 2016. Adoption of this standard resulted in a $0.8 million reduction to our income tax expense for the three months ended March 31, 2016. | |||||||||||
1
EMPLOYERS HOLDINGS, INC.
Summary Consolidated Balance Sheets (unaudited)
$ in millions, except per share amounts
March 31, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Investments, cash and cash equivalents | $ | 2,673.2 | $ | 2,623.4 | ||||
Accrued investment income | 20.1 | 20.6 | ||||||
Premiums receivable, net | 323.8 | 304.7 | ||||||
Reinsurance recoverable on paid and unpaid losses | 581.0 | 588.7 | ||||||
Deferred policy acquisition costs | 48.1 | 44.3 | ||||||
Deferred income taxes, net | 52.1 | 59.4 | ||||||
Contingent commission receivable—LPT Agreement | 31.1 | 31.1 | ||||||
Other assets | 104.2 | 101.2 | ||||||
Total assets | $ | 3,833.6 | $ | 3,773.4 | ||||
LIABILITIES | ||||||||
Unpaid losses and LAE | $ | 2,298.2 | $ | 2,301.0 | ||||
Unearned premiums | 330.8 | 310.3 | ||||||
Commissions and premium taxes payable | 49.3 | 48.8 | ||||||
Deferred reinsurance gain—LPT Agreement | 171.9 | 174.9 | ||||||
Notes payable | 32.0 | 32.0 | ||||||
Other liabilities | 83.9 | 65.8 | ||||||
Total liabilities | $ | 2,966.1 | $ | 2,932.8 | ||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock and additional paid-in capital | $ | 373.3 | $ | 372.6 | ||||
Retained earnings | 795.4 | 777.2 | ||||||
Accumulated other comprehensive income, net | 82.5 | 74.5 | ||||||
Treasury stock, at cost | (383.7 | ) | (383.7 | ) | ||||
Total stockholders’ equity | 867.5 | 840.6 | ||||||
Total liabilities and stockholders’ equity | $ | 3,833.6 | $ | 3,773.4 | ||||
Stockholders' equity including deferred reinsurance gain 1 | $ | 1,039.4 | $ | 1,015.5 | ||||
Adjusted stockholders' equity 1 | 956.9 | 941.0 | ||||||
GAAP Book Value per Share 1 | $ | 26.88 | $ | 26.16 | ||||
Book value per share 1 | 32.20 | 31.61 | ||||||
Adjusted Book Value per Share 1 | 29.65 | 29.29 | ||||||
1 See Page 8 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | ||||||||
2
EMPLOYERS HOLDINGS, INC.
Summary Consolidated Income Statements (unaudited)
$ in millions, except per share amounts
Three Months Ended | ||||||||
March 31, | ||||||||
2017 | 2016* | |||||||
Underwriting revenues: | ||||||||
Gross premiums written | $ | 197.6 | $ | 190.7 | ||||
Premiums ceded | (1.5 | ) | (2.0 | ) | ||||
Net premiums written | 196.1 | 188.7 | ||||||
Net premiums earned | 175.3 | 172.6 | ||||||
Underwriting expenses: | ||||||||
Losses and LAE incurred | (109.0 | ) | (107.3 | ) | ||||
Commission expense | (21.5 | ) | (20.3 | ) | ||||
Underwriting and other operating expenses | (35.9 | ) | (36.3 | ) | ||||
Underwriting income | 8.9 | 8.7 | ||||||
Net investment income | 18.8 | 17.8 | ||||||
Other income | — | 0.1 | ||||||
Interest expense | (0.4 | ) | (0.4 | ) | ||||
Net realized gains on investments | 2.2 | 1.5 | ||||||
Income tax expense | (6.3 | ) | (5.9 | ) | ||||
Net income | 23.2 | 21.8 | ||||||
Net unrealized gains on investments arising during the period, net of tax | 9.4 | 20.8 | ||||||
Reclassification adj. for realized gains in net income, net of tax | (1.4 | ) | (1.0 | ) | ||||
Comprehensive income | $ | 31.2 | $ | 41.6 | ||||
Add (subtract) | ||||||||
Amortization of deferred reinsurance gain - losses | $ | (2.4 | ) | $ | (2.6 | ) | ||
Amortization of deferred reinsurance gain - contingent commission | (0.5 | ) | (0.5 | ) | ||||
LPT reserve adjustment | — | — | ||||||
LPT contingent commission adjustments | — | — | ||||||
Net income before impact of the LPT Agreement 1 | $ | 20.3 | $ | 18.7 | ||||
Add (subtract) | ||||||||
Impact of the LPT Agreement | $ | (2.9 | ) | $ | (3.1 | ) | ||
Net realized losses (gains) on investments, net of tax | (1.4 | ) | (1.0 | ) | ||||
Amortization of intangibles, net of tax | — | 0.1 | ||||||
Operating income 1 | $ | 18.9 | $ | 17.8 | ||||
1 See Page 10 regarding our use of Non-GAAP Financial Measures. | ||||||||
*The Company adopted ASU Number 2016-9, Stock Compensation in the third quarter of 2016 with an effective date of January 1, 2016. Adoption of this standard resulted in a $0.8 million reduction to our income tax expense for the three months ended March 31, 2016. | ||||||||
3
EMPLOYERS HOLDINGS, INC.
Return on Equity (unaudited)
$ in millions, except per share amounts
Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016* | ||||||||
Net income | A | $ | 23.2 | $ | 21.8 | ||||
Add (subtract): | |||||||||
Impact of LPT Agreement | (2.9 | ) | (3.1 | ) | |||||
Net realized losses (gains) on investments, net of tax | (1.4 | ) | (1.0 | ) | |||||
Amortization of intangibles, net of tax | — | 0.1 | |||||||
Operating income 1 | B | $ | 18.9 | $ | 17.8 | ||||
Stockholders' equity - end of period | $ | 867.5 | $ | 803.7 | |||||
Stockholders' equity - beginning of period | 840.6 | 760.8 | |||||||
Average stockholders' equity | C | $ | 854.1 | $ | 782.3 | ||||
Stockholders' equity - end of period | $ | 867.5 | $ | 803.7 | |||||
Add (subtract): | |||||||||
Deferred reinsurance gain | 171.9 | 186.4 | |||||||
Accumulated other comprehensive income, net of tax | (82.5 | ) | (103.4 | ) | |||||
Adjusted stockholders' equity - end of period | 956.9 | 886.7 | |||||||
Adjusted stockholders' equity - beginning of period | 941.0 | 866.7 | |||||||
Average adjusted stockholders' equity 1 | D | $ | 949.0 | $ | 876.7 | ||||
Return on stockholders' equity | A / C | 2.7 | % | 2.8 | % | ||||
Annualized return on stockholders' equity | 10.9 | % | 11.1 | % | |||||
Operating return on adjusted stockholders' equity 1 | B / D | 2.0 | % | 2.0 | % | ||||
Annualized operating return on adjusted stockholders' equity 1 | 8.0 | % | 8.1 | % | |||||
1 See Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||
*The Company adopted ASU Number 2016-9, Stock Compensation in the third quarter of 2016 with an effective date of January 1, 2016. Adoption of this standard resulted in a $0.8 million reduction to our income tax expense for the three months ended March 31, 2016. | |||||||||
4
EMPLOYERS HOLDINGS, INC.
Combined Ratios (unaudited)
$ in millions, except per share amounts
Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016 | ||||||||
Net premiums earned | A | $ | 175.3 | $ | 172.6 | ||||
Losses and LAE incurred | B | 109.0 | 107.3 | ||||||
Amortization of deferred reinsurance gain - losses | 2.4 | 2.6 | |||||||
Amortization of deferred reinsurance gain - contingent commission | 0.5 | 0.5 | |||||||
LPT reserve adjustment | — | — | |||||||
LPT contingent commission adjustments | — | — | |||||||
Losses and LAE before impact of the LPT 1 | C | $ | 111.9 | $ | 110.4 | ||||
Less: favorable prior year loss reserve development | — | (0.3 | ) | ||||||
Losses and LAE before impact of the LPT - current accident year | D | $ | 111.9 | $ | 110.7 | ||||
Commission expense | E | 21.5 | 20.3 | ||||||
Underwriting and other operating expenses | F | 35.9 | 36.3 | ||||||
GAAP combined ratio: | |||||||||
Loss and LAE ratio | B/A | 62.2 | % | 62.2 | % | ||||
Commission expense ratio | E/A | 12.3 | % | 11.8 | % | ||||
Underwriting and other operating expense ratio | F/A | 20.4 | % | 21.0 | % | ||||
GAAP combined ratio | 94.9 | % | 95.0 | % | |||||
Combined ratio before impact of the LPT: 1 | |||||||||
Loss and LAE ratio before impact of the LPT | C/A | 63.8 | % | 64.0 | % | ||||
Commission expense ratio | E/A | 12.3 | % | 11.8 | % | ||||
Underwriting and other operating expense ratio | F/A | 20.4 | % | 21.0 | % | ||||
Combined ratio before impact of the LPT | 96.6 | % | 96.8 | % | |||||
Combined ratio before impact of the LPT: current accident year 1 | |||||||||
Loss and LAE ratio before impact of the LPT | D/A | 63.8 | % | 64.1 | % | ||||
Commission expense ratio | E/A | 12.3 | % | 11.8 | % | ||||
Underwriting and other operating expense ratio | F/A | 20.4 | % | 21.0 | % | ||||
Combined ratio before impact of the LPT: current accident year | 96.6 | % | 96.9 | % | |||||
1 See Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||
5
EMPLOYERS HOLDINGS, INC.
Roll-forward of Unpaid Losses and LAE (unaudited)
$ in millions
Three Months Ended | ||||||||
March 31, | ||||||||
2017 | 2016 | |||||||
Unpaid losses and LAE at beginning of period | $ | 2,301.0 | $ | 2,347.5 | ||||
Reinsurance recoverable on unpaid losses and LAE | 580.0 | 628.2 | ||||||
Net unpaid losses and LAE at beginning of period | 1,721.0 | 1,719.3 | ||||||
Losses and LAE incurred: | ||||||||
Current year losses | 111.9 | 110.7 | ||||||
Prior year losses on voluntary business | — | — | ||||||
Prior year losses on involuntary business | — | (0.3 | ) | |||||
Total losses incurred | 111.9 | 110.4 | ||||||
Losses and LAE paid: | ||||||||
Current year losses | 4.7 | 4.7 | ||||||
Prior year losses | 102.9 | 104.5 | ||||||
Total paid losses | 107.6 | 109.2 | ||||||
Net unpaid losses and LAE at end of period | 1,725.3 | 1,720.5 | ||||||
Reinsurance recoverable on unpaid losses and LAE | 572.9 | 621.4 | ||||||
Unpaid losses and LAE at end of period | $ | 2,298.2 | $ | 2,341.9 | ||||
6
EMPLOYERS HOLDINGS, INC.
Consolidated Investment Portfolio (unaudited)
$ in millions
March 31, 2017 | December 31, 2016 | |||||||||||||||||||||
Investment Positions: | Cost or Amortized Cost | Net Unrealized Gain (Loss) | Fair Value | % | Fair Value | % | ||||||||||||||||
Fixed maturities | $ | 2,350.6 | $ | 44.7 | $ | 2,395.3 | 90 | % | $ | 2,344.4 | 89 | % | ||||||||||
Equity securities | 117.6 | 82.2 | 199.8 | 7 | % | 192.2 | 7 | % | ||||||||||||||
Short-term investments | 15.4 | — | 15.4 | 1 | % | 16.0 | 1 | % | ||||||||||||||
Cash and cash equivalents | 58.6 | — | 58.6 | 2 | % | 67.2 | 3 | % | ||||||||||||||
Restricted cash and cash equivalents | 4.1 | — | 4.1 | — | % | 3.6 | — | % | ||||||||||||||
Total investments and cash | $ | 2,546.3 | $ | 126.9 | $ | 2,673.2 | 100 | % | $ | 2,623.4 | 100 | % | ||||||||||
Breakout of Fixed Maturities: | ||||||||||||||||||||||
U.S. Treasuries and Agencies | $ | 144.7 | $ | 4.0 | $ | 148.7 | 6 | % | $ | 140.2 | 6 | % | ||||||||||
States and Municipalities | 794.2 | 23.3 | 817.5 | 34 | % | 851.6 | 36 | % | ||||||||||||||
Corporate Securities | 969.1 | 16.6 | 985.7 | 41 | % | 956.7 | 41 | % | ||||||||||||||
Mortgage-Backed Securities | 396.9 | 0.9 | 397.8 | 17 | % | 353.5 | 15 | % | ||||||||||||||
Asset-Backed Securities | 45.7 | (0.1 | ) | 45.6 | 2 | % | 42.4 | 2 | % | |||||||||||||
Total fixed maturities | $ | 2,350.6 | $ | 44.7 | $ | 2,395.3 | 100 | % | $ | 2,344.4 | 100 | % | ||||||||||
Weighted average book yield | 3.1% | 3.1% | ||||||
Weighted average tax equivalent yield | 3.6% | 3.6% | ||||||
Average credit quality (S&P) | AA- | AA- | ||||||
Duration | 4.3 | years | 4.3 | years | ||||
7
EMPLOYERS HOLDINGS, INC.
Book Value Per Share (unaudited)
$ in millions, except per share amounts
March 31, 2017 | December 31, 2016 | March 31, 2016 | December 31, 2015 | ||||||||||||||
Numerators: | |||||||||||||||||
Stockholders' equity | A | $ | 867.5 | $ | 840.6 | $ | 803.7 | $ | 760.8 | ||||||||
Plus: Deferred reinsurance gain | 171.9 | 174.9 | 186.4 | 189.5 | |||||||||||||
Stockholders' equity including deferred reinsurance gain 1 | B | 1,039.4 | 1,015.5 | 990.1 | 950.3 | ||||||||||||
Less: Accumulated other comprehensive income, net of tax | 82.5 | 74.5 | 103.4 | 83.6 | |||||||||||||
Adjusted stockholders' equity 1 | C | $ | 956.9 | $ | 941.0 | $ | 886.7 | $ | 866.7 | ||||||||
Denominator (shares outstanding) | D | 32,276,213 | 32,128,922 | 32,483,983 | 32,216,480 | ||||||||||||
GAAP book value per share 1 | A / D | $ | 26.88 | $ | 26.16 | $ | 24.74 | $ | 23.62 | ||||||||
Book value per share 1 | B / D | 32.20 | 31.61 | 30.48 | 29.50 | ||||||||||||
Adjusted book value per share 1 | C / D | 29.65 | 29.29 | 27.30 | 26.90 | ||||||||||||
Cash dividends declared per share | $ | 0.15 | $ | 0.36 | $ | 0.09 | $ | 0.24 | |||||||||
YTD Change in: 2 | |||||||||||||||||
GAAP book value per share | 3.3 | % | 5.1 | % | |||||||||||||
Book value per share | 2.3 | % | 3.6 | % | |||||||||||||
Adjusted book value per share | 1.7 | % | 1.8 | % | |||||||||||||
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. | |||||||||||||||||
8
EMPLOYERS HOLDINGS, INC.
Earnings Per Share (unaudited)
$ in millions, except per share amounts
Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016* | ||||||||
Numerators: | |||||||||
Net income | A | $ | 23.2 | $ | 21.8 | ||||
Add (subtract): | |||||||||
Impact of the LPT Agreement | (2.9 | ) | (3.1 | ) | |||||
Net income before impact of LPT 1 | B | $ | 20.3 | $ | 18.7 | ||||
Net realized losses (gains) on investments, net of tax | (1.4 | ) | (1.0 | ) | |||||
Amortization of intangibles, net of tax | — | 0.1 | |||||||
Operating income 1 | C | $ | 18.9 | $ | 17.8 | ||||
Denominators: | |||||||||
Average common shares outstanding (basic) | D | 32,327,784 | 32,413,818 | ||||||
Average common shares outstanding (diluted) | E | 32,965,367 | 32,955,232 | ||||||
Net income per share: | |||||||||
Basic | A / D | $ | 0.72 | $ | 0.67 | ||||
Diluted | A / E | 0.70 | 0.66 | ||||||
Net income before impact of the LPT per share: 1 | |||||||||
Basic | B / D | $ | 0.63 | $ | 0.58 | ||||
Diluted | B / E | 0.62 | 0.57 | ||||||
Operating income per share: 1 | |||||||||
Basic | C / D | $ | 0.58 | $ | 0.55 | ||||
Diluted | C / E | 0.57 | 0.54 | ||||||
1 See Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||
*The Company adopted ASU Number 2016-9, Stock Compensation in the third quarter of 2016 with an effective date of January 1, 2016. Adoption of this standard resulted in a $0.8 million reduction to our income tax expense for the three months ended March 31, 2016. | |||||||||
9
Glossary of Financial Measures
Within this earnings release we present the following measures, each 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 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 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.
Operating income (see Page 4 for calculations) is net income excluding the effects of the LPT Agreement , net realized gains (losses) on investments (net of tax) 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.
Stockholders' equity including the deferred reinsurance gain is stockholders' equity including the deferred reinsurance 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 reinsurance 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 Operating 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.
GAAP book value per share , Book value per share 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.
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.
Net rate (which is defined as total premium in-force divided by total insured payroll exposure) indicates the average increase or decrease in premiums charged from period-to-period and is a function of a variety of factors, including rate changes, underwriting risk profiles and pricing, and changes in business mix.
10