Employers Holdings Inc · NYSE:EIG
Employers — Investor Presentation (April 2008)
28 slides from Employers's investor presentation, Apr 8, 2008
Slide 1: Employers Holdings, Inc. Management Presentation
Employers Holdings, Inc. Management Presentation April,
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 2007, 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: Agenda
EMPLOYERS Financial Results America’s small business insurance specialist.” Overview History & Key Strengths Geographic Footprint Disciplined Underwriting — Five Basic Elements Focus on Low to Medium Hazard Groups Customer Selection ‘Strategic Distribution Partners Strategies AmCOMP Acquisition - Co
Slide 4: Corporate Overview and Operations
Corporate Overview and Operations
Slide 5: 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 U.S. - direct premiums written at 12/31/07 – 72% in California – 17% in Nevada – 11% in nine
Slide 6: History & Key Strengths
2007 2002 2005 2008 To be the leader in workers’ compensation for small businesses History & Key Strengths (1) EICN = Employers Insurance Company of Nevada, SIIS = State Industrial Insurance System • Demutualization and IPO • Entry into California Market Goal: • EICN Assumed Assets, Liabilities and
Slide 7: 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 = 1.7% Direct Premiums Written (%) at 12/31/07 Geographic Footprint
Slide 8: Disciplined Underwriting
46.5% statutory loss and LAE ratio as of 12/31/07 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 9: Focus on Low to Medium Hazard Groups
EMPLOYERS Focus on low to medium hazard risks allows us to optimize risk selection and pricing adequacy Industry (1) % of Premiums Written, 12/31/06 (1) NCCI 2006 Premium Distribution by Hazard Group (as presented at 2007 Annual Issues Symposium). % of Premiums Written, 12/31/07 Focus on Low to Medi
Slide 10: 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 $ 22,292 6.4% C Physicians & Clerical 20,402 5.8 B Store: Wholesale 16,917 4.8 B Store: Retail 10,411 3.0 B College: Pro
Slide 11: 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 12: 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 · Invest in operations
Slide 13: AmCOMP Acquisition - Compelling Transaction
Strategic Rationale Key Terms AmCOMP Acquisition - - Compelling Transaction • Announced 1/10/08 • Estimated closing: 2Q • Subject to regulatory approvals and AmCOMP shareholder vote • $12.50 per share, $194 million equity value, $230 million including assumed debt • 100% cash consideration • Expecte
Slide 14: 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 Pro-Forma Rankings (1) CA NV FL TX WI Total U.S. (1) By 2006 Direct Premiums Written for states, b
Slide 15: Diversifies EMPLOYERS Geographic Footprint
EMPLOYERS EMPLOYERS + AmCOMP Pro Forma 11% 17% 5% 17% % of Direct Premiums Written, 12/31/07 California Indiana 3% Texas Other 44% 11% 6% Wisconsin Nevada Florida California Nevada Other 72% 11% Direct Premiums Written: $ 346 Million Direct Premiums Written: $ 567 Million Tennessee 3% Diversifies EM
Slide 16: America's small business insurance specialist
EMPLOYERS" pL ed Ai a America’s small business insurance specialist.”
Slide 17: Four Key Elements of Our Financial Strength
Surplus of $698 MM Catastrophe Reinsurance Program Conservative Reserving High Quality Investment Portfolio 0.5:1 NPW / Surplus at 12/31/07 Approximately 93% fixed maturity with average rating AA Coverage up to $200MM loss Track record of reserve strength Four Key Elements of Our Financial Strength
Slide 18: Loss Portfolio Transfer (LPT)
Loss Portfolio Transfer (LPT) • Non-recurring transaction with no ongoing cash benefits or charges to current operations • Retroactive 100% quota share reinsurance coverage for all losses occurring prior to 7/1/95 • Gain on transaction booked as statutory surplus; deferred and amortized under GAAP
Slide 19: Financial Snapshot
Net Premium Written Net Income Before Loss Portfolio Transfer (LPT) Equity Incl. Deferred Gain - LPT Statutory Surplus ($ 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 20: Growing In Force Policy Count
Total in force policy count has grown consistently Healthy in force policy count growth of 13.3% in Growing In Force Policy Count ’02 - ’07 CAGR = 7.3%
Slide 21: Selected Operating Results
Premiums declined due to California rate decreases Loss trends and Investments are driving net income Cash holdings increased to support acquisition and other capital management programs While premiums have declined in California, losses have also declined Selected Operating Results
Slide 22: 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. (3) Basic EPS a
Slide 23: Underwriting Profitability
_____________________________________________________ Total deferred gain amortization and LPT reserve adjustment of $43.8 million in 2005, $19.4 million in 2006, and $18 million in 2007. Our recent expense ratios are largely a function of declines in California rates. Net of $1.6 million commutatio
Slide 24: Investment Portfolio
Portfolio Mix at 12/31/07 • $1.7 billion of investment securities - Less than .03% related to sub-prime - Less than 6% related to financials • Approximately 93% AA rated • Book yield of 4.37% • Tax equivalent yield of 5.37% • Effective duration of 5.82 • Outsourced to Conning Asset Management Invest
Slide 25: 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 • $804 million GAAP adjusted eq
Slide 26: America's small business insurance specialist
EMPLOYERS" America’s small business insurance specialist.”
Slide 27: Summary
Summary • 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 - str
Slide 28: Analyst Contact
Analyst Contact: Vicki Erickson Vice President, Investor Relations Employers Holdings, Inc. (775) 327-2794 verickson@employers.com Professional Circle Reno, NV. 89521 (775) 327-2700 Douglas D. Dirks President & Chief Executive Officer Employers Holdings, Inc. William E. (Ric) Yocke Chief Financial O
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