Company to Host Conference Call on Friday,
February 17, 2023, at 11:00 a.m. Eastern Standard 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 fourth quarter and year ended
December 31, 2022.
Fourth Quarter 2022 Financial Highlights
- Net income of $47.2 million, or $1.72 per diluted share;
- Adjusted net income of $34.4 million, or $1.25 per diluted
share;
- Net investment income of $27.0 million, up 53%
year-over-year;
- Net realized and unrealized gains on investments recorded
through the income statement of $13.7 million;
- Gross premiums written of $173.8 million, up 22%
year-over-year;
- Net premiums earned of $181.1 million, up 16%
year-over-year;
- Favorable prior year loss reserve development of $23.2 million,
versus $24.2 million a year ago;
- Returned $43.6 million to stockholders through a combination of
share repurchases, quarterly and special dividends.
Full-Year 2022 Financial Highlights
- Net income of $48.4 million, or $1.75 per diluted share;
- Adjusted net income of $81.0 million, or $2.93 per diluted
share;
- Net investment income of $89.8 million, up 24%
year-over-year;
- Net realized and unrealized losses on investments recorded
through the income statement of $51.8 million;
- Gross premiums written of $714.2 million, up 21%
year-over-year;
- Net premiums earned of $675.2 million, up 18%
year-over-year;
- Record number of ending policies in-force of 121,356, up 9%
year-over-year;
- Favorable prior year loss reserve development of $33.5 million,
versus $39.8 million a year ago;
- Returned $121.7 million to stockholders through a combination
of share repurchases, quarterly and special dividends;
- Adjusted Book value per share of $43.78, up 3.0% year-over-year
including dividends declared.
CEO Commentary
Chief Executive Officer Katherine Antonello commented: “We are
pleased with our fourth quarter and full-year 2022 results and
closed the year with strong revenue growth driven by sharp
increases in both premium writings and net investment income. The
growth in written premium in 2022 resulted from a 16% increase in
new business coupled with an 8% increase in renewal business, and
notable audit premium recognition.
“We maintained our current accident year loss and loss
adjustment expense ratio on voluntary business at 64.0%, largely
consistent with the 63.5% we recorded throughout 2021. During the
fourth quarter, we recognized $23.2 million of net favorable prior
year loss reserve development resulting from lower-than-expected
loss emergence.”
Ms. Antonello continued, “Underwriting discipline remains a top
priority as we continue to thoughtfully execute our growth strategy
for both Employers and Cerity. The higher premium we experienced
throughout 2022, along with our strict focus on managing our fixed
expenses, resulted in a consolidated underwriting and general and
administrative expense ratio of 24.7% for 2022, far lower than any
other year since 2018.
“Our Cerity operating segment, which offers direct-to-consumer
digital workers' compensation insurance solutions, continues to
successfully grow its business within our targeted low-to-medium
hazard groups. Cerity’s written premium increased to $6.7 million
in 2022, from just $1.5 million in 2021.
“Our active capital management efforts throughout 2022, which
consisted of $30.4 million of share repurchases, $28.8 million of
regular quarterly dividends and $61.5 million of special dividends,
coupled with the greater economies of scale we are achieving, bode
well for the future of Employers. Our strong balance sheet and
abundant underwriting capital are highly supportive of our plans
for continued growth and success. Finally, I want to thank our
dedicated employees for an outstanding 2022. The unwavering service
you provide our agents, our policyholders and their injured workers
drive our continued success.”
Summary of Consolidated Fourth Quarter 2022 Results
(All comparisons vs. fourth quarter 2021, unless noted
otherwise).
Gross premiums written were $173.8 million, an increase of 22%.
The increase was primarily due to higher new and renewal business
writings and higher final audit premiums. Net earned premiums were
$181.1 million, an increase of 16%.
Losses and loss adjustment expenses were $91.2 million, an
increase of 29%. The increase was primarily due to higher earned
premium and lower favorable prior year loss reserve development.
The Company recognized $23.2 million of favorable prior year loss
reserve development during the quarter versus $24.2 million a year
ago.
Commission expenses were $26.0 million, an increase of 21%. The
increase was primarily due to higher earned premiums and higher
2022 agency incentive accruals.
Underwriting and general and administrative expenses were $46.7
million, an increase of 19%. The increase resulted primarily from
higher premium taxes, assessments, policyholder dividends and bad
debt expenses, each of which vary with earned premium.
Net investment income was $27.0 million, an increase of 53%. The
increase was due to higher bond yields and higher invested balances
of fixed maturity securities, short-term investments and cash and
cash equivalents, as measured by amortized cost.
Income tax expense was $8.7 million (15.6% effective rate)
versus $13.6 million (19.9% effective rate). The effective rates in
each period included income tax benefits and exclusions associated
with tax-advantaged investment income, LPT adjustments, and
deferred gain amortization. The effective rate in the fourth
quarter of 2022 further benefited from pre-privatization favorable
prior year loss and loss adjustment expense reserve adjustments and
a non-recurring tax benefit attributable to the repeal of Internal
Revenue Code section 847.
The Company’s book value per share including the deferred gain
of $38.67 decreased by 12.3% during 2022, computed after taking
into account dividends declared. This measure was adversely
impacted by $202.3 million of after-tax unrealized losses arising
from fixed maturity securities (which are reflected on the balance
sheet) and $38.2 million of net after tax unrealized losses arising
from equity securities and other investments (which are reflected
on the income statement). The Company’s adjusted book value per
share of $43.78 increased by 3.0% during 2022, computed after
taking into account dividends declared. This measure was adversely
impacted by $38.2 million of net after tax unrealized losses
arising from equity securities and other investments (which are
reflected on the income statement).
Summary of Fourth Quarter 2022 Results by Segment
(see page 16 of the Financial Supplement for a description of
our reportable segments. All comparisons are vs. fourth quarter
2021, unless noted otherwise).
Employers Segment
The Employers segment reported net income before income taxes of
$58.7 million versus $69.7 million.
Highlights included the following:
– Underwriting income of $24.2 million versus
$27.5 million; – Calendar year combined ratio of 86.6% versus
82.4%; – Current accident year loss and loss adjustment expense
ratio of 64.3% versus 64.2%; – Favorable prior year loss reserve
development of 12.8 percentage points versus 15.6 percentage
points; – Commission expense ratio of 14.5% versus 13.7%; –
Underwriting expense ratio of 20.6% versus 20.1%; – Net investment
income of $24.3 million versus $16.7 million; and – Net realized
and unrealized gains on investments of $12.0 million versus $24.8
million.
Cerity Segment
The Cerity segment reported a net loss before income tax of $1.6
million versus $2.4 million.
Highlights included the following:
– Underwriting loss of $3.3 million versus
$3.2 million; – Gross premiums written of $3.2 million versus $0.5
million; – Consistent current accident year loss and loss
adjustment expense ratios to that of the Employers segment; –
Favorable prior year loss reserve development of $0.1 million, –
Net investment income of $1.4 million versus $0.7 million; and –
Net realized and unrealized gains on investments of $0.3 million
versus $0.1 million.
Corporate and Other
Corporate and Other activities reported net income (loss) before
income taxes of $(1.2) million versus $1.1 million. Highlights
included the following:
– LPT amortization, which served to reduce
losses and loss adjustment expenses, of $2.0 million versus $5.4
million; – Net investment income of $1.3 million versus $0.3
million; – Net realized and unrealized gains on investments of $1.4
million versus $0.1 million, and – General and administrative
expenses of $5.7 million versus $4.6 million.
Share Repurchases and First Quarter 2023 Dividend
Declarations
During the fourth quarter of 2022, the Company repurchased
40,355 shares of its common stock at an average price of $42.15 per
share. During the period from January 1, 2023 through February 15,
2023, the Company repurchased a further 98,631 shares of its common
stock at an average price of $42.75 per share. The Company
currently has a remaining share repurchase authorization of $43.2
million.
On February 15, 2023, the Board of Directors declared a first
quarter 2023 dividend of $0.26 per share. The dividend is payable
on March 15, 2023 to stockholders of record as of March 1,
2023.
Earnings Conference Call and Webcast
The Company will host a conference call on Friday, February 17,
2023 at 11:00 a.m. Eastern Standard Time / 8:00 a.m. Pacific
Standard Time.
To participate in the live conference call you must first
register here. Once registered you will receive dial-in numbers and
a unique PIN number.
The webcast will be accessible on the Company’s web site at
www.employers.com through the “Investors” link. An archived version
of the webcast will 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 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, including the effects of the Coronavirus (COVID-19)
pandemic, 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 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. Fourth Quarter and Full Year
2022 Financial Supplement
EMPLOYERS HOLDINGS,
INC.
Table of Contents
Page
3
Consolidated Financial Highlights
4
Summary Consolidated Balance Sheets
5
Summary Consolidated Income Statements
6-9
Net Income Before Income Taxes by
Segment
10
Return on Equity
11
Roll-forward of Unpaid Losses and LAE
12
Consolidated Investment Portfolio
13
Book Value Per Share
14
Earnings Per Share
15
Non-GAAP Financial Measures
16
Description of Reportable Segments
EMPLOYERS HOLDINGS,
INC.
Consolidated Financial
Highlights (unaudited)
$ in millions, except per
share amounts
Three Months Ended
Years Ended
December 31,
December 31,
2022
2021
% change
2022
2021
% change
Selected financial highlights:
Gross premiums written
$
173.8
$
142.0
22
%
$
714.2
$
589.7
21
%
Net premiums written
171.9
140.4
22
707.2
583.1
21
Net premiums earned
181.1
156.4
16
675.2
574.4
18
Net investment income
27.0
17.7
53
89.8
72.7
24
Net income before impact of the LPT(1)
45.2
49.5
(9
)
40.1
107.8
(63
)
Adjusted net income(1)
34.4
29.8
15
81.0
67.9
19
Net income before income taxes
55.9
68.4
(18
)
55.8
147.0
(62
)
Net income
47.2
54.8
(14
)
48.4
119.3
(59
)
Comprehensive income (loss)
67.2
37.0
82
(151.1
)
64.8
(333
)
Total assets
3,716.7
3,783.2
(2
)
Stockholders' equity
944.2
1,213.1
(22
)
Stockholders' equity including the
Deferred Gain(2)
1,050.3
1,327.5
(21
)
Adjusted stockholders' equity(2)
1,189.2
1,266.9
(6
)
Annualized adjusted return on
stockholders' equity(3)
11.6
%
9.5
%
22
%
6.6
%
5.5
%
20
Amounts per share:
Cash dividends declared per share
$
1.51
$
0.25
504
%
$
3.28
$
1.00
228
%
Earnings per diluted share(4)
1.72
1.94
(11
)
1.75
4.17
(58
)
Earnings per diluted share before impact
of the LPT(4)
1.65
1.76
(6
)
1.45
3.77
(62
)
Adjusted earnings per diluted share(4)
1.25
1.06
18
2.93
2.37
24
Book value per share(2)
34.76
43.73
(21
)
Book value per share including the
Deferred Gain(2)
38.67
47.85
(19
)
Adjusted book value per share(2)
43.78
45.67
(4
)
Financial information by
Segment(5):
Net income (loss) before income taxes:
Employers
$
58.7
$
69.7
(16
) %
$
75.3
$
161.3
(53
) %
Cerity
(1.6
)
(2.4
)
33
(9.9
)
(9.6
)
(3
)
Corporate and Other
(1.2
)
1.1
(209
) %
(9.6
)
(4.7
)
(104
)
(1) See Page 5 for calculations and Page
15 for information regarding our use of Non-GAAP Financial
Measures.
(2) See Page 13 for calculations and Page
15 for information regarding our use of Non-GAAP Financial
Measures.
(3) See Page 10 for calculations and Page
15 for information regarding our use of Non-GAAP Financial
Measures.
(4) See Page 14 for calculations and Page
15 for information regarding our use of Non-GAAP Financial
Measures.
(5) See Pages 6-9 for details and Page 16
for a description of our reportable segments.
EMPLOYERS HOLDINGS,
INC.
Summary Consolidated Balance
Sheets (unaudited)
$ in millions, except per
share amounts
December 31,
2022
December 31,
2021
ASSETS
Available for sale:
Investments, cash and cash equivalents
$
2,658.2
$
2,811.3
Accrued investment income
19.0
14.5
Premiums receivable, net
305.9
244.7
Reinsurance recoverable, net of allowance,
on paid and unpaid losses and LAE
451.3
483.8
Deferred policy acquisition costs
48.3
43.7
Deferred income taxes, net
62.7
—
Contingent commission receivable—LPT
Agreement
13.9
13.9
Other assets
157.4
171.3
Total assets
$
3,716.7
$
3,783.2
LIABILITIES
Unpaid losses and LAE
$
1,960.7
$
1,981.2
Unearned premiums
339.5
304.7
Commissions and premium taxes payable
58.2
42.1
Deferred Gain
106.1
114.4
FHLB Advances (1)
182.5
—
Other liabilities
125.5
127.7
Total liabilities
$
2,772.5
$
2,570.1
STOCKHOLDERS' EQUITY
Common stock and additional paid-in
capital
$
415.2
$
411.3
Retained earnings
1,295.6
1,338.5
Accumulated other comprehensive (loss)
income, net
(138.9
)
60.6
Treasury stock, at cost
(627.7
)
(597.3
)
Total stockholders’ equity
944.2
1,213.1
Total liabilities and stockholders’
equity
$
3,716.7
$
3,783.2
Stockholders' equity including the
Deferred Gain (2)
$
1,050.3
$
1,327.5
Adjusted stockholders' equity (2)
1,189.2
1,266.9
Book value per share (2)
$
34.76
$
43.73
Book value per share including the
Deferred Gain (2)
38.67
47.85
Adjusted book value per share (2)
43.78
45.67
(1) FHLB = Federal Home Loan Bank
(2) See Page 13 for calculations and Page
15 for information regarding our use of Non-GAAP Financial
Measures.
EMPLOYERS HOLDINGS,
INC.
Summary Consolidated Income
Statements (unaudited)
$ in millions
Three Months Ended
Years Ended
December 31,
December 31,
2022
2021
2022
2021
Revenues:
Net premiums earned
$
181.1
$
156.4
$
675.2
$
574.4
Net investment income
27.0
17.7
89.8
72.7
Net realized and unrealized gains (losses)
on investments(1)
13.7
25.0
(51.8
)
54.6
Other income
—
0.7
0.3
1.4
Total revenues
221.8
199.8
713.5
703.1
Expenses:
Losses and LAE incurred
(91.2
)
(70.7
)
(391.0
)
(315.2
)
Commission expense
(26.0
)
(21.4
)
(95.9
)
(76.1
)
Underwriting and general and
administrative expenses
(46.7
)
(39.2
)
(167.3
)
(160.2
)
Interest and financing expenses
(2.0
)
(0.1
)
(3.5
)
(0.5
)
Other expenses
—
—
—
(4.1
)
Total expenses
(165.9
)
(131.4
)
(657.7
)
(556.1
)
Net income before income taxes
55.9
68.4
55.8
147.0
Income tax expense
(8.7
)
(13.6
)
(7.4
)
(27.7
)
Net income
47.2
54.8
48.4
119.3
Unrealized AFS investment gains (losses)
arising during the period, net of tax
19.9
(17.4
)
(202.3
)
(51.3
)
Reclassification adjustment for realized
AFS investment gains (losses) in net income, net of tax
0.1
(0.4
)
2.8
(3.2
)
Total Comprehensive income
(loss)
$
67.2
$
37.0
$
(151.1
)
$
64.8
Net income
$
47.2
$
54.8
$
48.4
$
119.3
Amortization of the Deferred Gain -
losses
(1.7
)
(1.7
)
(6.8
)
(6.7
)
Amortization of the Deferred Gain -
contingent commission
(0.3
)
(0.5
)
(1.5
)
(1.7
)
LPT reserve adjustment
—
(2.6
)
—
(2.6
)
LPT contingent commission adjustments
—
(0.5
)
—
(0.5
)
Net income before impact of the LPT
Agreement (2)
$
45.2
$
49.5
$
40.1
$
107.8
Net realized and unrealized (gains) losses
on investments
(13.7
)
(25.0
)
51.8
(54.6
)
Non-recurring severance costs and asset
impairment charges
—
—
—
4.1
Income tax expense (benefit) related to
items excluded from Net income
2.9
5.3
(10.9
)
10.6
Adjusted net income (2)
$
34.4
$
29.8
$
81.0
$
67.9
(1) Includes unrealized gains (losses) on
equity securities and other invested assets of $16.9 million and
$23.6 million for the three months ended December 31 2022 and 2021,
respectively, and $(72.3) million and $34.9 million for the year
ended December 31, 2022 and 2021, respectively
(2) See Page 15 regarding our use of
Non-GAAP Financial Measures.
EMPLOYERS HOLDINGS,
INC.
Net Income Before Income Taxes
by Segment(1) (unaudited)
$ in millions
Year Ended December 31, 2022
Employers
Cerity
Corporate and Other
Consolidated
Gross premiums written
$
707.5
$
6.7
$
—
$
714.2
Net premiums written
700.5
6.7
—
707.2
Net premiums earned
A
672.1
3.1
—
675.2
Net investment income
82.1
4.1
3.6
89.8
Net realized and unrealized losses on
investments
(44.0
)
(1.3
)
(6.5
)
(51.8
)
Other income
0.3
—
—
0.3
Total revenues
710.5
5.9
(2.9
)
713.5
Losses and LAE incurred
B
(397.5
)
(1.8
)
8.3
(391.0
)
Commission expense
C
(95.8
)
(0.1
)
—
(95.9
)
Underwriting expenses
D
(138.9
)
(13.9
)
—
(152.8
)
General and administrative expenses
—
—
(14.5
)
(14.5
)
Interest and financing expenses
(3.0
)
—
(0.5
)
(3.5
)
Total expenses
(635.2
)
(15.8
)
(6.7
)
(657.7
)
Net income (loss) before income
taxes
$
75.3
$
(9.9
)
$
(9.6
)
$
55.8
Underwriting income (loss)
A+B+C+D
$
39.9
$
(12.7
)
Loss and LAE expense ratio:
Current year
64.1
%
n/m
Prior years
(5.0
)
n/m
Loss and LAE ratio
59.1
n/m
Commission expense ratio
14.3
n/m
Underwriting expense ratio
20.7
n/m
Combined ratio
94.1
%
n/m
n/m - not meaningful
(1) See Page 16 for a description of our
reportable segments.
EMPLOYERS HOLDINGS,
INC.
Net Income Before Income Taxes
by Segment(1) (unaudited)
$ in millions
Year Ended December 31, 2021
Employers
Cerity
Corporate and Other
Consolidated
Gross premiums written
$
588.2
$
1.5
$
—
$
589.7
Net premiums written
581.6
1.5
—
583.1
Net premiums earned
A
573.7
0.7
—
574.4
Net investment income
69.3
2.8
0.6
72.7
Net realized and unrealized gains (losses)
on investments
54.5
0.3
(0.2
)
54.6
Other income
1.4
—
—
1.4
Total revenues
698.9
3.8
0.4
703.1
Losses and LAE incurred
B
(326.2
)
(0.5
)
11.5
(315.2
)
Commission expense
C
(76.1
)
—
—
(76.1
)
Underwriting expenses
D
(131.2
)
(12.9
)
—
(144.1
)
General and administrative expenses
—
—
(16.1
)
(16.1
)
Interest and financing expenses
—
—
(0.5
)
(0.5
)
Other expenses
(4.1
)
—
—
(4.1
)
Total expenses
(537.6
)
(13.4
)
(5.1
)
(556.1
)
Net income (loss) before income
taxes
$
161.3
$
(9.6
)
$
(4.7
)
$
147.0
Underwriting income (loss)
A+B+C+D
$
40.2
$
(12.7
)
Loss and LAE expense ratio:
Current year
63.8
%
n/m
Prior years
(6.9
)
—
Loss and LAE ratio
56.9
n/m
Commission expense ratio
13.3
n/m
Underwriting expense ratio
22.9
n/m
Combined ratio
93.1
%
n/m
n/m - not meaningful
(1) See Page 16 for a description of our
reportable segments.
EMPLOYERS HOLDINGS,
INC.
Net Income Before Income Taxes
by Segment(1) (unaudited)
$ in millions
Three Months Ended December 31,
2022
Employers
Cerity
Corporate and Other
Consolidated
Gross premiums written
$
170.6
$
3.2
$
—
$
173.8
Net premiums written
168.8
3.1
—
171.9
Net premiums earned
A
180.0
1.1
—
181.1
Net investment income
24.3
1.4
1.3
27.0
Net realized and unrealized gains on
investments
12.0
0.3
1.4
13.7
Total revenues
216.3
2.8
2.7
221.8
Losses and LAE incurred
B
(92.7
)
(0.5
)
2.0
(91.2
)
Commission expense
C
(26.1
)
0.1
—
(26.0
)
Underwriting expenses
D
(37.0
)
(4.0
)
—
(41.0
)
General and administrative expenses
—
—
(5.7
)
(5.7
)
Interest and financing expenses
(1.8
)
—
(0.2
)
(2.0
)
Total expenses
(157.6
)
(4.4
)
(3.9
)
(165.9
)
Net income (loss) before income
taxes
$
58.7
$
(1.6
)
$
(1.2
)
$
55.9
Underwriting income (loss)
A+B+C+D
$
24.2
$
(3.3
)
Loss and LAE expense ratio:
Current year
64.3
%
n/m
Prior years
(12.8
)
n/m
Loss and LAE ratio
51.5
n/m
Commission expense ratio
14.5
n/m
Underwriting expense ratio
20.6
n/m
Combined ratio
86.6
%
n/m
n/m - not meaningful
(1) See Page 16 for a description of our
reportable segments.
EMPLOYERS HOLDINGS,
INC.
Net Income Before Income Taxes
by Segment(1) (unaudited)
$ in millions
Three Months Ended December 31,
2021
Employers
Cerity
Corporate and Other
Consolidated
Gross premiums written
$
141.5
$
0.5
$
—
$
142.0
Net premiums written
139.9
0.5
—
140.4
Net premiums earned
A
156.1
0.3
—
156.4
Net investment income
16.7
0.7
0.3
17.7
Net realized and unrealized gains on
investments
24.8
0.1
0.1
25.0
Other income
0.7
—
—
0.7
Total revenues
198.3
1.1
0.4
199.8
Losses and LAE incurred
B
(75.9
)
(0.2
)
5.4
(70.7
)
Commission expense
C
(21.4
)
—
—
(21.4
)
Underwriting expenses
D
(31.3
)
(3.3
)
—
(34.6
)
General and administrative expenses
—
—
(4.6
)
(4.6
)
Interest and financing expenses
—
—
(0.1
)
(0.1
)
Total expenses
(128.6
)
(3.5
)
0.7
(131.4
)
Net income (loss) before income
taxes
$
69.7
$
(2.4
)
$
1.1
$
68.4
Underwriting income (loss)
A+B+C+D
$
27.5
$
(3.2
)
Loss and LAE expense ratio:
Current year
64.2
%
n/m
Prior years
(15.6
)
—
Loss and LAE ratio
48.6
n/m
Commission expense ratio
13.7
n/m
Underwriting expense ratio
20.1
n/m
Combined ratio
82.4
%
n/m
n/m - not meaningful
(1) See Page 16 for a description of our
reportable segments.
EMPLOYERS HOLDINGS,
INC.
Return on Equity
(unaudited)
$ in millions
Three Months Ended
Years Ended
December 31,
December 31,
2022
2021
2022
2021
Net income
A
$
47.2
$
54.8
$
48.4
$
119.3
Impact of the LPT Agreement
(2.0
)
(5.3
)
(8.3
)
(11.5
)
Net realized and unrealized (gains) losses
on investments
(13.7
)
(25.0
)
51.8
(54.6
)
Non-recurring severance costs and asset
impairment charges
—
—
—
4.1
Income tax expense (benefit) related to
items excluded from Net income
2.9
5.3
(10.9
)
10.6
Adjusted net income(1)
B
$
34.4
$
29.8
$
81.0
$
67.9
Stockholders' equity - end of period
$
944.2
$
1,213.1
$
944.2
$
1,213.1
Stockholders' equity - beginning of
period
919.0
1,189.9
1,213.1
1,212.8
Average stockholders' equity
C
$
931.6
$
1,201.5
$
1,078.7
$
1,213.0
Stockholders' equity - end of period
$
944.2
$
1,213.1
$
944.2
$
1,213.1
Deferred Gain - end of period
106.1
114.4
106.1
114.4
Accumulated other comprehensive loss
(income), before taxes - end of period
175.8
(76.7
)
175.8
(76.7
)
Income tax related to accumulated other
comprehensive (loss) income - end of period
(36.9
)
16.1
(36.9
)
16.1
Adjusted stockholders' equity - end of
period
1,189.2
1,266.9
1,189.2
1,266.9
Adjusted stockholders' equity - beginning
of period
1,186.0
1,230.7
1,266.9
1,223.1
Average adjusted stockholders'
equity(1)
D
$
1,187.6
$
1,248.8
$
1,228.1
$
1,245.0
Return on stockholders' equity
A / C
5.1
%
4.6
%
4.5
%
9.8
%
Annualized return on stockholders'
equity
20.3
18.2
Adjusted return on stockholders'
equity(1)
B / D
2.9
2.4
6.6
5.5
Annualized adjusted return on
stockholders' equity(1)
11.6
9.5
(1) See Page 15 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
Years Ended
December 31,
December 31,
2022
2021
2022
2021
Unpaid losses and LAE at beginning of
period
$
1,979.9
$
2,002.1
$
1,981.2
$
2,069.4
Less reinsurance recoverable on unpaid
losses and LAE
456.4
478.4
476.9
497.0
Net unpaid losses and LAE at beginning of
period
1,523.5
1,523.7
1,504.3
1,572.4
Losses and LAE incurred:
Current year
116.5
100.3
432.8
366.5
Prior years - voluntary business
(22.5
)
(23.0
)
(32.1
)
(38.0
)
Prior years - involuntary business
(0.7
)
(1.2
)
(1.4
)
(1.8
)
Total losses incurred
93.3
76.1
399.3
326.7
Losses and LAE paid:
Current year
42.1
34.0
92.5
76.6
Prior years
59.4
61.5
295.8
318.2
Total paid losses
101.5
95.5
388.3
394.8
Net unpaid losses and LAE at end of
period
1,515.3
1,504.3
1,515.3
1,504.3
Reinsurance recoverable, excluding CECL
allowance, on unpaid losses and LAE
445.4
476.9
445.4
476.9
Unpaid losses and LAE at end of period
$
1,960.7
$
1,981.2
$
1,960.7
$
1,981.2
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 $2.0 million and
$5.3 million for the three months ended December 31, 2022 and 2021,
respectively, and $8.3 million and $11.5 million for the year ended
December 31, 2022 and 2021, respectively.
EMPLOYERS HOLDINGS,
INC.
Consolidated Investment
Portfolio (unaudited)
$ in millions
December 31, 2022
December 31, 2021
Investment Positions:
Cost or Amortized
Cost(1)
Net Unrealized Gain
(Loss)
Fair Value
%
Fair Value
%
Fixed maturity securities
$
2,366.7
$
(175.9
)
$
2,186.3
82
%
$
2,342.7
83
%
Equity securities
150.9
52.8
203.7
8
344.4
12
Other invested assets
54.4
5.3
59.7
2
38.4
1
Short-term investments
119.1
—
119.1
4
10.5
—
Cash and cash equivalents
89.2
—
89.2
3
75.1
3
Restricted cash and cash equivalents
0.2
—
0.2
—
0.2
—
Total investments and cash
$
2,780.5
$
(117.8
)
$
2,658.2
100
%
$
2,811.3
100
%
Breakout of Fixed Maturity
Securities:
U.S. Treasuries and Agencies
$
97.3
$
(4.4
)
$
92.9
4
%
$
68.1
3
%
States and Municipalities
326.7
(9.1
)
317.6
15
436.1
19
Corporate Securities
963.4
(92.5
)
868.1
40
1,080.3
46
Mortgage-Backed Securities
465.0
(49.7
)
415.3
19
414.1
18
Asset-Backed Securities
74.0
(7.9
)
66.1
3
68.5
3
Collateralized loan obligations
268.1
(7.2
)
260.9
12
85.4
4
Bank loans and other
172.2
(5.1
)
165.4
8
190.2
8
Total fixed maturity securities
$
2,366.7
$
(175.9
)
$
2,186.3
100
%
$
2,342.7
100
%
Weighted average ending book yield
3.9
%
3.0
%
Average credit quality (S&P)
A
A+
Duration
3.9
3.4
(1) Amortized cost excludes an allowance
for current expected credit losses (CECL) of $4.5 million
EMPLOYERS HOLDINGS,
INC.
Book Value Per Share
(unaudited)
$ in millions, except per
share amounts
December 31,
2022
December 31,
2021
Numerators:
Stockholders' equity
A
$
944.2
$
1,213.1
Deferred Gain
106.1
114.4
Stockholders' equity including the
Deferred Gain(1)
B
1,050.3
1,327.5
Accumulated other comprehensive loss
(income), before taxes
175.8
(76.7
)
Income taxes related to accumulated other
comprehensive (loss) income, before taxes
(36.9
)
16.1
Adjusted stockholders'
equity(1)
C
$
1,189.2
$
1,266.9
Denominator (shares
outstanding)
D
27,160,748
27,741,400
Book value per share(1)
A / D
$
34.76
$
43.73
Book value per share including the
Deferred Gain(1)
B / D
38.67
47.85
Adjusted book value per share(1)
C / D
43.78
45.67
Cash dividends declared per share
$
3.28
$
1.00
YTD Change in:(2)
Book value per share
(13.0
) %
5.3
%
Book value per share including the
Deferred Gain
(12.3
)
4.3
Adjusted book value per share
3.0
9.0
(1) See Page 15 for information regarding
our use of Non-GAAP Financial Measures.
(2) Reflects the change 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
Years Ended
December 31,
December 31,
2022
2021
2022
2021
Numerators:
Net income
A
$
47.2
$
54.8
$
48.4
$
119.3
Impact of the LPT Agreement
(2.0
)
(5.3
)
(8.3
)
(11.5
)
Net income before impact of the LPT
(1)
B
$
45.2
$
49.5
$
40.1
$
107.8
Net realized and unrealized (gains) losses
on investments
(13.7
)
(25.0
)
51.8
(54.6
)
Non-recurring severance costs and asset
impairment charges
—
—
—
4.1
Income tax expense (benefit) related to
items excluded from Net income
2.9
5.3
(10.9
)
10.6
Adjusted net income (1)
C
$
34.4
$
29.8
$
81.0
$
67.9
Denominators:
Average common shares outstanding
(basic)
D
27,258,246
27,931,565
27,503,941
28,289,118
Average common shares outstanding
(diluted)
E
27,435,134
28,178,237
27,680,988
28,600,993
Earnings per share:
Basic
A / D
$
1.73
$
1.96
$
1.76
$
4.22
Diluted
A / E
1.72
1.94
1.75
4.17
Earnings per share before impact of the
LPT:(1)
Basic
B / D
$
1.66
$
1.77
$
1.46
$
3.81
Diluted
B / E
1.65
1.76
1.45
3.77
Adjusted earnings per share:(1)
Basic
C / D
$
1.26
$
1.07
$
2.95
$
2.40
Diluted
C / E
1.25
1.06
2.93
2.37
(1) See Page 15 for information regarding
our use of Non-GAAP Financial Measures.
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 5 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 13 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 13 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 10 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 13
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 5 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 underwriting platform 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 is defined as traditional business
offered through the EMPLOYERS brand name through its agents,
including business originated from its strategic partnerships and
alliances;
- The Cerity segment is defined 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/20230216005643/en/
Company Contact: Mike Paquette (775) 327-2562 or
mpaquette@employers.com
Investor Relations Contact: Karin Daly, The Equity Group Inc.
(212) 836-9632 or kdaly@equityny.com
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