Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Employers Holdings, Inc. | ex991_pressreleasex33118.htm |
| 8-K - 8-K - Employers Holdings, Inc. | earningsrelease8k_3312018.htm |
Exhibit 99.2
Employers Holdings, Inc.
First Quarter 2018
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, | |||||||||||
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. | |||||||||||
1
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. | ||||||||
2
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. | |||||||
3
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. | ||||||||
4
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. | ||||||||
5
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.
6
EMPLOYERS HOLDINGS, INC.
Consolidated Investment Portfolio (unaudited)
$ in millions
March 31, 2018 | December 31, 2017 | |||||||||||||||||||||
Investment Positions: | Cost or Amortized Cost | Net Unrealized (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 | ||||||||
7
EMPLOYERS HOLDINGS, INC.
Book Value Per Share (unaudited)
$ in millions, except per share amounts
March 31, 2018 | December 31, 2017 | March 31, 2017 | December 31, 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. | ||||||||||||||||
8
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. | ||||||||
9
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.
10