Eastern Insurance Plc · DSEBD:EASTERNINS
Eastern Insurance — Keefe, Bruyette & Woods Insurance Conference 2010
28 slides from Eastern Insurance's conference presentation, Sep 8, 2010
Slide 1: Keefe, Bruyette & Woods Insurance Conference
Keefe, Bruyette & Woods Insurance Conference September 7 - 8, 2010 Eastern Insurance Holdings, Inc. Bruce Eckert Chief Executive Officer Kevin Shook Treasurer & Chief Financial Officer Exhibit 99.1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may include forward-looking statements. These forward-looking statements include comments with respect to our objectives and strategies, and the results of our operations and business. By their nature, however, these forward-looking statements involve num
Slide 3: Overview of Eastern Insurance Holdings, Inc.
Overview of Eastern Insurance Holdings, Inc. • NASDAQ: EIHI • Workers’ Compensation Insurance Subsidiaries Rated “A” (Excellent) by A.M. Best • As of June 30, 2010, Total Assets of $358.5 Million and Shareholders’ Equity of $150.5 Million • June 30, 2010 Diluted Book Value per Share of $15.95 • For
Slide 4: EIHI Business Segments
EIHI Segregated Portfolio Cell Reinsurance Third Party Administration and Corporate Workers’ Compensation Specialty Reinsurance (Currently in Run-Off) EIHI Business Segments EIHI Segregated Portfolio Cell Reinsurance Third Party Administration and Corporate Workers’ Compensation 80.5% of DWP 0.0% of
Slide 5: What Makes EIHI Different?
What Makes EIHI Different? INTEGRITY : Our behavior is the benchmark to which others aspire. •Diversity of Underwriting Risk •Strong Balance Sheet and Conservative Loss Reserving Practices •Consideration of Unemployment Data •Controlled Geographic Expansion INNOVATION : Our employees are committed t
Slide 6: Specialist
Workers’ Compensation Specialist • Broad Product Spectrum • Disciplined Underwriting Focused on Rate Adequacy • Extensive Medical Cost Containment Strategies • Proactive Claims Management, and Strategic use of Return-to-Work Initiatives • Value-Added Risk Management Services • Strategic Partnerships
Slide 7: Licenses
Workers’ Compensation Licenses • Direct Written Premium of $26.6 Million for the Three Months Ended 06.30.10, and $24.9 Million for the Three Months Ended 06.30.09 - Licenses - Agency Appointments
Slide 8: Direct Written Premium Geography
Workers’ Compensation Direct Written Premium Geography Delaware, 0.4% Maryland, 0.1% Pennsylvania, 99.5% Pennsylvania, 73.4% Other, 2.5% Delaware, 1.4% Maryland, 2.5% Virginia, 2.4% Indiana, 12.2% North Carolina, 5.6%
Slide 9: Risk Diversification
Workers’ Compensation Risk Diversification •Active Policies = 6,083 •Over 400 Class Codes Actively Written Top 10 Classes Exposure Base: PA, DE, MD, VA, NC, SC 17.9% Clerical / Office 8.1% Doctors / Dentists 7.0% Auto Dealers 5.0% Salesmen - Outside 4.4% Colleges / Schools 3.6% Restaurant 3.5% Nursi
Slide 10: Product Spectrum
Workers’ Compensation Product Spectrum Percentages as of June 30, 2010 •81.6% <$20K, 15.0% $20K-$100K, 3.4% $100K+ Alternative Markets - Jointly Owned, 15.1% Large Deductible, 4.6% Retrospective Rating, 2.5% Guaranteed Cost, 55.4% Policyholder Dividend, 11.9% Alternative Markets, 10.5%
Slide 11: Direct Written Premium Growth Rates
Workers’ Compensation Direct Written Premium Growth Rates 10.4% 7.7% 8.9% 13.6% 20.6% 8.0% 7.3% $- $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 YTD
Slide 12: EIHI Workers' Compensation Market Share in Three Core States
EIHI Workers’ Compensation Market Share in Three Core States 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% Pa In NC
Slide 13: Claim Closing Patterns
Workers’ Compensation Claim Closing Patterns Results as of June 30, 2010 Number of Net Claims Claims Open Claims Closed
Slide 14: Key Operating Statistics – June 30, 2010
Workers’ Compensation Key Operating Statistics – June 30, 2010 7.3% Direct written premium growth 86.2% in guaranteed cost Policyholder dividend management 2.2% Renewal rate decreases 87.0% Premium renewal retention Underwriting: $ 59,031 $ 33,862 Average compromise and release 14.1 weeks 11.9 weeks
Slide 15: Alternative Markets
Workers’ Compensation Alternative Markets … Alternative Options • Services to employers who self-insure their workers’ compensation exposure • Fee based revenue for EIHI • EIHI ownership interest in SPC’s produced aggregate net income of $4.5 million since inception • 14 Active Segregated Portfolio
Slide 16: Pennsylvania Workers' Compensation Market Share (Top 20)
Pennsylvania Workers’ Compensation Market Share (Top 20) (dollars in thousands) 2009 Gross Written Premium Five Year Average Loss Ratio Three Year Average Loss Ratio 1. Liberty Mutual Insurance Company $ 179,148 77.07% 77.94% 2. American International Group 172,759 79.24% 73.98% 3. Zurich Financial
Slide 17: Indiana Workers' Compensation Market Share (Top 20)
Indiana Workers’ Compensation Market Share (Top 20) (dollars in thousands) 2009 Gross Written Premium Five Year Average Loss Ratio Three Year Average Loss Ratio 1. Liberty Mutual Insurance Company $ 98,443 57.47% 61.15% 2. Travelers Group 44,312 50.05% 52.02% 3. American International Group 36,429 6
Slide 18: North Carolina Workers' Compensation Market Share (Top 20)
North Carolina Workers’ Compensation Market Share (Top 20) Source: 2009 Best’s State/Line (P/C Lines). 31.65% 31.65% 5,045 Eastern Alliance Insurance Group 39. (dollars in thousands) 2009 Gross Written Premium Five Year Average Loss Ratio Three Year Average Loss Ratio 1. Liberty Mutual Insurance Com
Slide 19: Eastern Insurance Holdings, Inc. Financial Model
Eastern Insurance Holdings, Inc. Financial Model • Active Capital Management – Geographic Expansion – Stock Repurchases – Shareholder Dividends – M&A Opportunities • Underwriting Profit – Underwriting, Risk Management and Claims Philosophy – Financial Underwriting – Low Expense Ratio • Investment Re
Slide 20: Combined Ratio History
Workers’ Compensation Combined Ratio History 79.1% 65.6% 80.2% 87.7% 92.4% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% YTD 2010
Slide 21: Investment Portfolio Mix
Investment Portfolio Mix Total Cash and Invested Assets: $267.7 Million as of June 30, 2010 7% 4% 7% 24% 58% Fixed Income Securities Convertible Bonds Equity Securities Other Long-Term Investments Cash and Cash Equivalents
Slide 22: Balance Sheet Strength
Balance Sheet Strength • 74.7% of June 30, 2010 Assets are in Cash and Invested Assets • Excellent Collection History on Premiums Receivable • Strong Reinsurer Security • Unpaid Loss and Loss Adjustment Expense – Reserves Recorded Near High End of Actuarial Range – History of Favorable Workers’ Comp
Slide 23: Loss Reserving Practices
Workers’ Compensation Loss Reserving Practices (in thousands) 6-30-10 3-31-10 12-31-09 9-30-09 6-30-09 Case reserves $ 36,230 $ 35,622 $ 33,073 $ 36,496 $ 34,324 IBNR 24,659 24,854 27,451 26,756 26,333 Discount (3,059) (3,027) (3,097) (3,161) (3,033) Subtotal 57,830 57,449 57,427 60,091 57,624 Purch
Slide 24: Eastern Insurance Holdings, Inc. Capital Position
Eastern Insurance Holdings, Inc. Capital Position Reported Implied (in thousands) Target Implied Capital 6/30/2010 Book Value Book Value Unallocated Tangible BV NPW (1) NPW/ Surplus Requirement GAAP Equity Per Share Per Share Capital Per Share Workers' compensation insurance 81,283 $ 1.25 65,026 $ 8
Slide 25: EIHI Fully Diluted Book Value Performance
EIHI Fully Diluted Book Value Performance $14.50 $14.95 $14.92 $15.16 $15.57 $16.27 $16.43 $16.33 $15.80 $14.13 $14.16 $14.82 $15.55 $15.78 $16.07 $15.95 $12.50 $13.00 $13.50 $14.00 $14.50 $15.00 $15.50 $16.00 $16.50 Fully Diluted Book Value Quarter
Slide 26: Historical Diluted Earnings Per Share
Workers’ Compensation Historical Diluted Earnings Per Share $0.04 $0.19 $0.27 $0.31 $0.23 $0.21 $0.16 $0.46 $0.59 $0.30 $0.32 $0.06 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70
Slide 27: Sale of Eastern Life and Health Insurance Co.
Sale of Eastern Life and Health Insurance Co. • Closed June 21, 2010 • Consideration equal to: – GAAP book value plus $250,000 = $34.1 million • Pre merger distribution = $31.8 million • $1.75 million note • Cash = $0.5 million • Proceeds used to: – Grow workers’ compensation business – Repurchase s
Slide 28: Eastern Insurance Holdings
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