Employers Holdings Inc · NYSE:EIG
Employers — New York Society of Security Analysts 12th Annual Insurance Industry Conference (February 2008)
31 slides from Employers's conference presentation, Feb 11, 2008
Slide 1: NYSSA 12th Annual Insurance Industry Conference
New York Society of Security Analysts 12 th Annual Insurance Industry Conference February,
Slide 2: Safe Harbor Disclosure and Non-GAAP Financial Measures
This slide presentation is for informational purposes only. It should be read in conjunction with our Form 10-K for the year 2006, our Form 10-Q for the second and third quarters of 2007 and our Form 8-Ks filed with the Securities and Exchange Commission (SEC), all of which are available on the “Inv
Slide 3: Safe Harbor Disclosure (continued)
EMPLOYERS, AmCOMP and their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding EMPLOYERS directors and executive officers is available in EMPLOYERS' proxy statemen
Slide 4: America's small business insurance specialist
America’s small business insurance specialist.” Expanding Geographic Footprint Disciplined Undervaiting — Five Basic Elements Focus on Low to Medium Hazard Groups Customer Selection Strategic Distribution Partners Strategies AmCOMP Acquisition - Compelling Transaction Expands EMPLOYERS Geographic Fo
Slide 5: Corporate Overview and Operations
Corporate Overview and Operations
Slide 6: Overview
· Specialty provider of workers’ compensation insurance – 18 th largest private writer in the U.S. (1) – 8 th largest private writer in California (1) – 2 nd largest writer in Nevada (1) · Focused in western United States · Small businesses in low to medium hazard industries · Distribution through i
Slide 7: Key Strengths
Key Strengths • Established enterprise with 95 year operating history • Focused operations and disciplined underwriting - target an attractive and underserved market segment with growth opportunities • Unique and long-standing strategic distribution relationships • Financial strength and flexibility
Slide 8: Expanding Geographic Footprint
FL TX MT CO UT ID AZ CA OR IL NM MD OK KS NE SD ND WY NV WA KY ME PA NH MA CT VA WV OH IN NC TN SC AL AR LA MO IA MN GA MS VT NJ DE RI RECENT STATES Florida, Oregon, Texas, Arizona and Illinois = 1.3% Direct Premiums Written (%) for nine months ended 9/30/07 Expanding Geographic Footprint
Slide 9: Disciplined Underwriting
47.6% statutory loss and LAE ratio as of 9/30/07 Disciplined Underwriting Risk Selection Expertise Strong Underwriting Culture Focused Guidelines and Consistent Automated Approach Local Knowledge Pricing of Individual Risks Five Basic Elements Disciplined Underwriting
Slide 10: Focus on Low to Medium Hazard Groups
(1) NCCI 2006 Premium Distribution by Hazard Group (as presented at 2007 Annual Issues Symposium). Focus on Low to Medium Hazard Groups
Slide 11: Customer Selection
EMPLOYERS further differentiates risks within industry-defined customer classes Customer Selection Hazard Group Class Direct Premiums Written (000s) Percent of Total A Restaurants $ 27,654 7.1% C Physicians & Clerical 24,858 6.4 B Store: Wholesale 18,854 4.8 B College: Professional Employees & Cleri
Slide 12: Strategic Distribution Partners
Strategic partners expand market reach and produce business with high persistency • Largest payroll services company in the U.S. with over 450,000 clients • Partner since entering California market in 2002 • Business originated by ADP’s field sales staff and insurance agency • “Pay-by-Pay” premium c
Slide 13: Strategies
· Target attractive, underserved small business market · Maintain disciplined risk selection, underwriting and pricing · Expand in current markets and in our new states · Leverage infrastructure, technology and systems · Utilize existing and new strategic distribution partners · Consider opportunist
Slide 14: AmCOMP Acquisition - Compelling Transaction
Policyholders by Industry Group 29% Written Premium by State: $176 M 14% 23% 6% Miscellaneous 6% Contracting Manufacturing Office and Clerical 6% 40% 19% Goods and Services Florida Wisconsin Georgia Other 29% 13% 8% 7% Tennessee Indiana Texas % of Direct Premiums Written, 09/30/07 AmCOMP Acquisition
Slide 15: Expands EMPLOYERS Geographic Footprint
MT CO UT ID AZ NV CA OR FL NM MD TX OK KS NE SD ND WY WA KY ME NY PA NH MA CT VA WV OH IN IL NC TN SC AL AR LA MO IA MN GA MS VT NJ DE RI AmCOMP EMPLOYERS Overlap Expands EMPLOYERS Geographic Footprint (1) By 2006 Direct Premiums Written for states, by 2006 Net Premiums Written for total U.S., A.M.
Slide 16: Diversifies EMPLOYERS Geographic Footprint
EMPLOYERS EMPLOYERS + AmCOMP Pro Forma 12% 17% 5% 19% % of Direct Premiums Written, 09/30/07 California Indiana 3% Texas Other 43% 11% 6% Wisconsin Florida Nevada California Nevada Other 71% 10% Direct Premiums Written: $ 268 Million Direct Premiums Written: $ 443 Million Tennessee 3% Diversifies EM
Slide 17: Compelling Transaction
Compelling Transaction • Increased scale – Diversifies earnings base – Reduces expense ratio – Enhances visibility with agents / customers • Meaningful synergies – $10 million annual pre-tax cost savings achievable by 2010 ú Phase-in of approximately 25% in 2008, approximately 75% in 2009 and 100% i
Slide 18: Acquisition of AmCOMP - Key Terms
· $12.50 per share, $194 million equity value, $230 million including assumed debt · 100% cash consideration · Expected financing sources: combination of debt and cash · Implied multiple of earnings of 9.5x and 11.5x for 2007E and 2008E, respectively (1) · 1.2x 12/31/07E GAAP book value (2) · Announ
Slide 19: America's small business insurance specialist
— — America’s small business insurance specialist.”
Slide 20: Four Key Elements of Our Financial Strength
Surplus of $673MM at 9/30/2007 Catastrophe Reinsurance Program Conservative Reserving High Quality Investment Portfolio 0.5:1 NPW / Surplus (Trailing 12 months NPW at 9/30/07) Approximately 90% fixed maturity with average rating AA at 9/30/07 Coverage up to $200MM loss Track record of reserve streng
Slide 21: Loss Portfolio Transfer (LPT)
Contract $ Accounting at 9/30/07 $ millions Total Coverage $2,000 Original Reserves Transferred $1,525 Consideration Gain at 1/1/2000 Subsequent Reserve Adjustments (147.5) Gain at 9/30/2007 $602.5 $ millions Statutory Surplus Created $602.5 Cumulative Amortization To Date (173.2) GAAP: Deferred Rei
Slide 22: Financial Snapshot
Net Premium Written Net Income Before Loss Portfolio Transfer (LPT) Equity Incl. Deferred Gain - LPT Statutory Surplus ($ million) Premium growth has declined due to California rate decreases Strong growth provides a solid basis for underwriting Loss trends and investments are driving net income Cap
Slide 23: Growing In Force Policy Count
Total in force policy count has grown consistently with a 2002 - 2006 CAGR of 6% • Solid in force policy count growth continued in the third quarter, – 33,027 at 9/30/07 – 29,311 at 9/30/06 – Total increase of 3,716 or 12.7% Growing In Force Policy Count
Slide 24: Selected Operating Results
EMPLOYERS $ Million America’s small business insurance specialist.” Income Statement Data Gross Premiums Written $4018 $2713 Net Premiums Written 387.2 262.0 Net Premiums Eamed 393.0 2624 Net Investment Incame 68.2 59.4 Net Incame 118 88.5 Net Income Before LPT 1522 748 Balance Sheet Data Total inve
Slide 25: Earnings and EPS
(1) Pro Forma EPS for 2006 assumes 50,000,002 shares outstanding before the conversion. (2) Pro forma basic and diluted EPS computed using the weighted average shares outstanding during the period after the Company’s IPO and assumes the 50,000,002 shares outstanding prior to the IPO. Equity instrume
Slide 26: Underwriting Profitability
(1) Excluding $43.4 million of favorable development in the first nine months of 2007, our loss ratio before the LPT would have been 64.2% and our combined ratio would have been 103.7%. We target a combined ratio of 100. (2) Total deferred gain amortization and LPT reserve adjustment of $19.4 millio
Slide 27: Investment Portfolio
• $1.7 billion of investment securities - Less than .03% related to sub-prime - Less than 6% related to financials • Approximately 90% AA rated • Book yield of 4.4% • Tax equivalent book yield of 5.3% • Effective duration of 5.7 • Outsourced to Conning Asset Management Portfolio Mix at 9/30/07 Inves
Slide 28: Capital Management
Holding Company Cash Flow Strong Capital Position Our goal is to drive shareholder value through an improving ROE resulting from (i) profitability consistent with historical results, (ii) disciplined growth and (iii) prudent capital management Capital Management Tools • In 2007 greater than $100 mil
Slide 29: EMPLOYERS
EMPLOYERS goes: America’s small business insurance specialist.”
Slide 30: Summary
Summary • Established enterprise with 95 year operating history • Focused operations and disciplined underwriting - target an attractive and underserved market segment with growth opportunities • Pending acquisition - - when closed, immediate growth in premium • Unique and long-standing strategic di
Slide 31: Analyst Contact
Analyst Contact: Vicki Erickson Vice President, Investor Relations Employers Holdings, Inc. (775) 327-2794 verickson@employers.com Gateway Drive Reno, NV. 89521-5906 (775) 327-2700 Douglas D. Dirks President & Chief Executive Officer Employers Holdings, Inc. William E. (Ric) Yocke Chief Financial Of