Employers Holdings Inc · NYSE:EIG
Employers — The Association of Insurance and Financial Analysts 33rd Annual Conference (March 2008)
28 slides from Employers's conference presentation, Mar 3, 2008
Slide 1: Association of Insurance and Financial Analysts 33rd Annual Conference
The Association of Insurance and Financial Analysts 33 rd Annual Conference March, 2008
Slide 2: Non-GAAP Financial Measures and Forward-looking Statements
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 quarters of 2007 and our Form 8-Ks filed with the Securities and Exchange Commission (SEC), all of which are available on the “Investor Relations”
Slide 3: Contents Page
Contents Page< /font> Compelling Transactions Expands EMPLOYERS Geographic Footprint Diversifies EMPLOYERS Geographic Footprint Corporate Overview and Operations Overview Geographic Footprint Key Strengths Strategies Acquisition of AmCOMP - Key Terms Financial Results Four Key Elements of our Financ
Slide 4: EMPLOYERS: America's small business insurance specialist
EMPLOYERS America’s small business insurance specialist.”
Slide 5: Overview
Business · 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) Geographic · Focused in Western U.S. - direct premiums written at 12/31/07 – 72% in California – 17% in
Slide 6: Geographic Footprint
2000 2002 2006 2007 FL NM MD TX OK KS NE SD ND MT WY CO UT ID AZ NV WA CA OR KY ME PA NH MA CT VA WV OH IN IL NC TN SC AL AR LA MO IA MN GA MS VT NJ DE RI RECENT STATES Florida, Oregon, Texas, Arizona and Illinois = 1.7% 2 Direct Premiums Written (%) at 12/31/07 Geographic Footprint
Slide 7: Key Strengths
3 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 flexibili
Slide 8: Strategies
Focus on Profitability · Target attractive, underserved small business market · Maintain disciplined risk selection, underwriting and pricing Pursue Organic Growth Opportunities · Expand in current markets and in our new states · Leverage infrastructure, technology and systems · Utilize existing and
Slide 9: Acquisition of AmCOMP - Key Terms
23% Consideration / Financing · $12.50 per share, $194 million equity value, $230 million including assumed debt · 100% cash consideration · Expected financing sources: combination of debt and cash Timing · Announced 1/10/08 · Estimated closing: 2Q 2008 · Subject to regulatory approvals and AmCOMP s
Slide 10: Acquisition of AmCOMP - Compelling Transaction
Acquisition of AmCOMP - Compelling Transaction Written Premium by State: $175 M AmCOMP % of Direct Premiums Written, 09/30/07 6 Wisconsin Texas Florida Other 29% 13% 14% 8% 6% 7% Indiana Tennessee Georgia Kentucky 5% 13% Illinois 5% • Excellent strategic fit – Mono-line workers’ compensation company
Slide 11: Expands EMPLOYERS Geographic Footprint
FL NM MD TX OK KS NE SD ND MT WY CO UT ID AZ NV WA CA OR 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 Pro-Forma Rankings (1) CA 8 NV 2 FL 10 TX 14 WI 14 Total U.S. 14 (1) By 2006 Direct Premiums Writt
Slide 12: Diversifies EMPLOYERS Geographic Footprint
EMPLOYERS EMPLOYERS + AmCOMP Pro Forma % of Direct Premiums Written, 09/30/07 California Indiana 3% Texas Other 43% 12% 17% 11% 5% 6% Wisconsin Florida Nevada California Nevada Other 71% 19% 10% Direct Premiums Written: $ 268 Million Direct Premiums Written: $ 443 Million Tennessee 3% 8 Diversifies
Slide 13: America's small business insurance specialist
America’s small business insurance specialist”
Slide 14: Four Key Elements of Our Financial Strength
Surplus of $698 MM Conservative Reserving High Quality Investment Portfolio Catastrophe Reinsurance Program 0.5:1 NPW / Surplus at 12/31/07 Approximately 93% fixed maturity with average rating AA Coverage up to $200MM loss Track record of reserve strength 10 Four Key Elements of Our Financial Streng
Slide 15: Financial Snapshot
Net Premium Written (GAAP) Net Income Before Loss Portfolio Transfer (LPT) (GAAP) Equity Incl. Deferred Gain - LPT (GAAP) Statutory Surplus ($ million) Premium growth has declined due to California rate decreases Strong growth provides a solid basis for underwriting Loss trends and investments are d
Slide 16: Capital Management
Holding Company Cash Flow Strong Capital Position • $804 million GAAP adjusted equity at 12/31/07 • 0.5:1 NPW/surplus at 12/31/2007 • No debt pre-acquisition • Reserve strength Our goal is to drive shareholder value through an improving ROE resulting from (i) profitability consistent with historical
Slide 17: EMPLOYERS: America's small business insurance specialist
EMPLOYERS" America’s small business insurance specialist.”
Slide 18: Summary
14 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 d
Slide 19: EMPLOYERS: America's small business insurance specialist
EMPLOYERS America’s small business insurance specialist.”
Slide 20: Disciplined Underwriting
46.5% statutory loss and LAE ratio as of 12/31/07 Risk Selection Expertise Strong Underwriting Culture Focused Guidelines and Consistent Automated Approach Disciplined Underwriting Local Knowledge Pricing of Individual Risks Five Basic Elements 16 Disciplined Underwriting
Slide 21: Focus on Low to Medium Hazard Groups
17 (1) NCCI 2006 Premium Distribution by Hazard Group (as presented at 2007 Annual Issues Symposium). Our top ten classes are in the lowest four hazard groups and represent 33% of direct premium written and 42% of in force policies at 12/31/07 Focus on Low to Medium Hazard Groups
Slide 22: Strategic Distribution Partners
• 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 collection Strategic partners expand market reach and produce business with high pe
Slide 23: Loss Portfolio Transfer (LPT)
Contract $ millions Total Coverage $2,000 Original Reserves Transferred $1,525 Consideration $ 775 Gain at 1/1/2000 750 Subsequent Reserve Adjustments (147.5) Gain at 12/31/2007 $602.5 Accounting at 12/31/07 $ millions Statutory Surplus Created $602.5 Cumulative Amortization To Date (177.5) GAAP: De
Slide 24: Selected Operating Results
20 Selected Operating Results
Slide 25: Earnings and EPS
21 (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. (3) Basic EP
Slide 26: Underwriting Profitability
NOTE: Excluding $60.0 million of favorable development in 2007, our loss ratio before LPT would have been 63.8% and our combined ratio would have been 102.9% We target a combined ratio of 100. The total combined ratio includes three items causing upward pressure: (1) one shock loss requiring additio
Slide 27: Investment Portfolio
Portfolio Mix at 12/31/07 23 U.S. Treasury Securities 9.0% Corporate Securities 10.8% U.S. Agency Securities 7.7% Tax-exempt Municipal Securities 51.9% Mortgage-backed Securities 10.5% Commercial Mortgage-backed Securities 2.7% Asset-backed Securities 1.2% Equities 6.2% • $1.7 billion of investment
Slide 28: Analyst Contact
Analyst Contact: Vicki Erickson Vice President, Investor Relations Employers Holdings, Inc. (775) 327-2794 verickson@employers.com 9790 Gateway Drive Reno, NV. 89521-5906 (775) 327-2700 Douglas D. Dirks President & Chief Executive Officer Employers Holdings, Inc. William E. (Ric) Yocke Chief Financi