Employers Holdings Inc · NYSE:EIG
Employers — Investor Presentation (May 2009)
33 slides from Employers's investor presentation, May 19, 2009
Slide 1: Employers Holdings, Inc. Investor Presentation
Employers Holdings, Inc. Investor Presentation May,
Slide 2: Safe Harbor Disclosure
Safe Harbor Disclosure This slide presentation is for informational purposes only. It should be read in conjunction with our Form 10-K for the year 2008, our Form 10-Q for the first quarter of 2009 and our Form 8-Ks filed with the Securities and Exchange Commission (SEC), all of which are available
Slide 3: Overview
· Specialty provider of workers’ compensation insurance · Coverage required by statute » Medical, temporary/permanent indemnity, death · 30 states with concentrations in CA, FL, WI and NV » Unique markets by state and area · Small “main street” businesses » Small business accounts for over 70% of ne
Slide 4: History and geographic expansion
FL NM MD TX OK KS MT CO UT ID AZ CA OR KY PA VA IN IL NC TN SC AL AR MO IA MN MS WI CA GA NE SD ND WY NV WA MA CT WV OH LA VT NJ DE 1913 - State WC fund in NV Privatization Demutualization and IPO - entry into FL, IL and OR Acquisition, book of business in CA, UT, ID, MT, CO Formation of mutual hold
Slide 5: America's small business insurance specialist
EMPLOYER: “Target ractve, undeserved smal business market Maintain asojalined tsk selection, unserertng, pricin ane claims operations + Foous on urderyniing prottabiny America’s small business insurance specialist. + Selectvely expand into ‘adstone: mares * Increase pensraton in current markets Leve
Slide 6: EMPLOYERS: America's small business insurance specialist
EMPLOYERS America’s small business insurance specialist.
Slide 7: Acquisition Outcomes
El America’s small business insurance specialis ? Acquisition Outcomes Excellent Improved inmeda Financial Financial Integration strategic fit- | scale Ree oune benefits benefits (cont) | on Track small +From 11 to 30 758% inerease in sinvestment spend of | *$12million pre- + People business states
Slide 8: Integration progress: people, branches, business
PEOPLE • Senior management staffing changes implemented • 14% staff reduction underway BRANCHES • Consolidating corporate functions into corporate headquarters – Centralizing support functions of 18 branch offices • Field organization in place – 5 business units • Complete rebranding of 9 acquired b
Slide 9: Disciplined Underwriting
Disciplined Underwriting Risk Selection Expertise Strong Underwriting Culture Focused Guidelines and Consistent Automated Approach Pricing of Individual Risks Local Knowledge Disciplined Underwriting
Slide 10: Disciplined Risk Selection
C Physicians and Clerical 6.8 A Restaurants 6.5 B Wholesale Stores 5.1 B Retail Stores 2.9 B College Employees 2.7 C Clothing Manufacturers 2.6 D Automobile Services 2.3 C Clerical 2.2 D Machine Shops 2.0 C Retail Grocery/Provisions Stores 1.8 Total Top 10 34.9 Disciplined Risk Selection Lower Risk
Slide 11: Claims management programs
El America’s small business insurance specialist. In-house medical management staff + Coordinate care and manage medical costs + URAC accreditation in case managementand utilization review Comprehensive fraud program + $4.2 million savings in 2008 Rigorous quality assurance processes + Ensure compli
Slide 12: Delivering Superior Loss Ratios
Delivering Superior Loss Ratios Consistently Lower Loss and LAE Ratios than the Industry A.M. Best, “Aggregates and Averages”
Slide 13: Unique Distribution Network
Independent Agents and Brokers Strategic Partnerships Industry Focused Unique Distribution Network • California Restaurant Association provider of choice • California Medical Association sponsorship • Over 1,900 in place • Strong relationships with agents Physicians and restaurants are our top two c
Slide 14: Increasing Points of Access: Strategic Partnerships
Increasing Points of Access Strategic Partnerships
Slide 15: Strong Retention Rates
Strong Retention Rates Strategic Partnerships Result in Consistently Higher Retention Rates
Slide 16: Increasing Market Penetration
$ million policies NPW 2002 - 2008 CAGR, 9% Policy Count 2002 - 2008 CAGR,12% • Substantive M & A growth • Responsible, strong in force policy growth – 33.2% increase (3/31/08 to 3/31/09) • Maintaining underwriting discipline Increasing Market Penetration Purchased Fremont Book of Business Purchased
Slide 17: Strong Capital Position
Strong Capital Position ($ million) .8 to NPW/Statutory Surplus Ratio $355 million extraordinary dividends to parent in 2008 Strong Growth in Statutory Surplus Provides a Solid Basis for Underwriting
Slide 18: Loss Portfolio Transfer (LPT)
Contract ($ million) Total Coverage $2,000 Original Reserves (Liabilities) Transferred $1,525 Consideration $ 775 Gain at 1/1/2000 750 Subsequent Reserve Adjustments (147.5) Gain at 3/31/09 $602.5 Accounting at 3/31/09 ($ million) Statutory Surplus Created $602.5 Cumulative Amortization To Date (200
Slide 19: High Quality Investment Portfolio
$2.08 billion fair market value High Quality Investment Portfolio Portfolio at 3/31/09
Slide 20: Track Record of Reserve Strength
Reserve Review Reserve Development Track Record of Reserve Strength History of Reserve Strength Net reserves for workers’ comp industry estimated to be deficient by $6 Billion at 12/31/08 (1) (1) NCCI, “2009 State of the Line” Net Calendar Year Reserve Releases for Prior Accident Years ($ million)
Slide 21: High Quality Reinsurance
Program Structure Reinsurance Management High Quality Reinsurance
Slide 22: Prudent Capital Management
Investing in the Future Returning Capital to Shareholders Holding Company Flexibility Prudent Capital Management Dividends Share Repurchases $80 million in cash $18 million in additional upstream dividends in 2009 Over $200 million in fixed maturities (Over $100 million in maturing securities over t
Slide 23: Selected Operating Results
Income Statement ($ million) 2005 2006 2007 2008 Q1 2009 Gross Written Premium $ 458.7 $ 401.8 $ 350.7 $ 322.9 $ 128.1 Net Written Premium 439.7 387.2 338.6 312.8 124.7 Net Earned Premium 438.3 393.0 346.9 328.9 111.6 Net Investment Income 54.4 68.2 78.6 78.1 23.3 Net Income 137.6 171.6 120.3 101.8
Slide 24: Consistently Profitable Underwriting
(LPT is 10%) (LPT is 4.9%) (LPT is 5.2%) (LPT is 12%) (LPT is 16.8%) (LPT is 5.5%) (LPT is 5.6%) (LPT is 3.9%) Consistently Profitable Underwriting Underwriting model targets a 100% combined ratio and a 12- 13% return on a premium dollar NOTE: LPT percentages include reserve adjustments 84.9% 72.6%
Slide 25: Continuing Profits
Continuing Profits Net Income Before LPT 2002 - 2008 CAGR = 40% $ million NOTE: 50,000,002 pro forma shares prior to February 5, 2007 (IPO date) 0.34
Slide 26: Return on Average Adjusted Equity, Increasing Book Value per Share
Trailing 12 Months ROAAE Return on Average Adjusted Equity, Increasing Book Value per Share NOTE: 50,000,002 pro forma shares prior to February 5, 2007 (IPO date) Return on Average Equity includes deferred gain related to the LPT - equity in the ROE calculation is averaged for the period
Slide 27: Summary of Financial Strength
Strong Underwriting Leverage Catastrophe Reinsurance Program Summary of Financial Strength Conservative Reserving High Quality Investment Portfolio .8 to 1 Surplus to NPW at 3/31/09 $2 billion - over 97% fixed maturity with average rating AA Track record of reserve strength: since IPO, $145 million
Slide 28: Key Strengths
Key Strengths • Established enterprise with consistently strong performance - year operating history • Focused operations and disciplined underwriting - attractive, underserved target market segment with growth opportunities • Unique and long-standing strategic distribution relationships - resulting
Slide 29: Management and Analyst Contact
Douglas D. Dirks President & Chief Executive Officer Employers Holdings, Inc. William E. (Ric) Yocke Chief Financial Officer Employers Holdings, Inc. Analyst Contact: Vicki Erickson Vice President, Investor Relations Employers Holdings, Inc. (775) 327-2794 verickson@employers.com Professional Circle
Slide 30: EMPLOYERS: America's small business insurance specialist
EMPLOYERS ar America’s small business insurance specialist.
Slide 31: Organization
Organization Employers Holdings, Inc. Employers Insurance Company of Nevada Employers Compensation Insurance Company Employers Preferred Insurance Company Employers Occupational Health, Inc . Employers Assurance Company Elite Insurance Services EIG Services, Inc. Pinnacle Benefits, Inc. AmSERV, Inc.
Slide 32: Computation of Adjusted Expense Ratio on Level Premiums
COMPUTATION OF ADJUSTED EXPENSE RATIO ON LEVEL PREMIUMS Three Months Three Months Ending Ending 3/31/2008 3/31/2009 (millions) Earned Premium Employers $ 75.8 $ 111.6 Acquired operations 52.2 - 128.0 D 111.6 A Underwriting & Other Operating Expenses 41.7 36.5 Policyholder Dividends 2.4 2.0 Total Exp
Slide 33: Regional Organization, Pricing Trends in 2009
NY MA KY OH IN MO IA MN IL MIDWEST KS SD NM TX OK MT CO UT ID AZ NV WESTERN CA OR PACIFIC MD PA VA WV NC TN AL AR LA GA MS SC FL SOUTHEAST +10% -16.0% -3.8% +3.5% -18.6% -2.4% -5.9% +6.4% -2.3% +0.4% -5.1% -13.0% -7.7% +9.1% -15.0% -18.8% (5/1/09) Regional Organization, Pricing Trends in 2009 at 4/1
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