Employers Holdings Inc · NYSE:EIG
Employers — Keefe, Bruyette & Woods Insurance Conference 2009
31 slides from Employers's conference presentation, Sep 8, 2009
Slide 1: Employers Holdings, Inc.
Employers Holdings, Inc. Keefe, Bruyette & Woods Insurance Conference September, 2009
Slide 2: Overview
· Specialty provider of workers’ compensation insurance · Coverage required by statute Ø Medical, temporary/permanent indemnity, death · 30 states with concentrations in CA, FL, WI and NV Ø Unique markets by state and area · Small “main street” businesses Ø Small business accounts for over 70% of ne
Slide 3: America's small business insurance specialist
E America’s small business insurance specialist.” + Target attractive, underserved small business market + Maintain disciplined risk selection, underwriting, pricing and claims operations + Focus on underwriting profitability [E + Selectively expand into additional markets + Increase penetration in
Slide 4: Acquisition Update / Outcomes
El America’s small business insurance specialis ? Acquisition Update / Outcomes Excellent Improved eee Financial Financial Integration strategic fit — scale premium volume benefits benefits (cont) | on track small +From 11 to 30 <A1%incteasein Net | «Investment spendof | -$12million pre- + People bu
Slide 5: Geographic footprint and history
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 NE SD ND WY NV WA MA CT WV OH LA VT NJ DE 1913 - 1999 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 ho
Slide 6: 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 Hazard Grou
Slide 7: Claims management
EMPLOYERS America’s small business insurance specialist. In-house medical management staff + Coordinate care and manage medical costs + URAC accreditation in case management and utilization review Comprehensive fraud program + $4.2 million savings in 2008 Rigorous quality assurance processes + Ensur
Slide 8: Delivering Superior Loss Ratios
Delivering Superior Loss Ratios Consistently Lower Loss and LAE Ratios than the Industry A.M. Best, “Aggregates and Averages”
Slide 9: Unique Distribution Network
Independent Agents and Brokers Strategic Partnerships Industry Focused Unique Distribution Network • Over 1,900 in place • Strong relationships with agents • ADP • Wellpoint • E-chx / Granite • Intego Services • Wells Fargo • Telepayroll Physicians and restaurants are our top two classes of customer
Slide 10: Increasing Points of Access
Increasing Points of Access Strategic Partnerships
Slide 11: Strong Retention Rates
Strong Retention Rates Strategic Partnerships Result in Consistently Higher Retention Rates
Slide 12: Increasing Market Penetration - Unit Count
$ million # policies Increasing Market Penetration - Unit Count Purchased Fremont Book of Business Purchased AmCOMP Incorporated Policy Count ‘02-’08 CAGR = 12% NPW ‘02-’08 CAGR = 9%
Slide 13: Strong Capital Position
Strong Capital Position ($ million) .7 to 1 NPW/Statutory Surplus Ratio $355 million extraordinary dividends to parent in 2008 Strong Growth in Statutory Surplus Provides a Solid Basis for Underwriting
Slide 14: Loss Portfolio Transfer (LPT)
Contract ($ 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 6/30/09 $602.5 Accounting at 6/30/09 ($ million) Statutory Surplus Created $602.5 Cumulative Amortization To Date (204
Slide 15: High Quality Investment Portfolio
$2.1 billion fair market value • Approximately 97% fixed maturities with an average weighted AA rating • Book yield of 4.7% • Tax equivalent book yield of 5.6% • Effective duration of 5.11 • 2008: added $418 million acquired assets • Managed by Conning Asset Management • Minimal impacts during chall
Slide 16: History of Reserve Strength
Reserve Review Reserve Development Track Record of Reserve Strength $13.5 History of Reserve Strength Net reserves for workers’ comp industry estimated to be deficient by $6 Billion at 12/31/08 (1) (1) NCCI, “2009 State of the Line” Net Calendar Year Reserve Releases for Prior Accident Years ($ mill
Slide 17: Prudent Capital Management
Dividends Share Repurchases Investing in the Future Returning Capital to Shareholders Holding Company Flexibility Prudent Capital Management Over $200 million in fixed maturities ($100 million in maturing securities over the next year at subsidiaries) Investing in operations Investing in securities
Slide 18: Consistently Profitable Underwriting
(LPT is 10%) (LPT is 4.9%) (LPT is 5.2%) (LPT is 5.2%) (LPT is 5.6%) (LPT is 4.0%) 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% 85.6% 91.5% Expense ratio in
Slide 19: Continuing Profits
93.8 152.2 102.2 83.4 16.5 16.0 Q 2 = Q 1 = 1.88 3.04 1.98 1.69 0.68 Six months ended 6/30/09 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 Net Income Before LPT Six months ended June 30, 2009 EPS Before LPT $ million 32.5 Continuing Profits Net Income Before LPT 2002 - 2008 CAGR = 40% NOTE: 50,00
Slide 20: Return on Average Adjusted Equity, Increasing Book Value per Share
Trailing 12 Months ROAAE 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 f
Slide 21: High Quality Reinsurance
Program Structure, Effective 7/1/09 Reinsurance Management High Quality Reinsurance Reinsurers by Area
Slide 22: Summary of Financial Strength
Strong Underwriting Leverage Catastrophe Reinsurance Program Summary of Financial Strength Conservative Reserving High Quality Investment Portfolio .7 to 1 Surplus to NPW at 6/30/09 $2 billion - over 97% invested in fixed maturity with average weighted rating of AA Track record of reserve strength:
Slide 23: Key Strengths
Key Strengths • Established enterprise with consistently strong performance - 96 year operating history • Focused operations and disciplined underwriting - attractive, underserved target market segment with growth opportunities • Unique and long-standing strategic distribution relationships - result
Slide 24: Douglas D. Dirks
Douglas D. Dirks President & Chief Executive Officer Employers Holdings, Inc. William E. (Ric) Yocke Chief Financial Officer Employers Holdings, Inc. Analyst Contact: Vicki Erickson Vice President, Investor Relations Employers Holdings, Inc. (775) 327-2794 verickson@employers.com 10375 Professional
Slide 25: Stock Ownership Limitations
Stock Ownership Limitations ● As a reminder to investors, Employers Holdings, Inc. (“EIG”) owns several insurance companies, domiciled in several different states. These wholly-owned insurers are regulated by insurance commissioners and are subject to the statutes and regulations of the various stat
Slide 26: Safe Harbor Disclosure
Safe Harbor Disclosure This slide presentation is for informational purposes only. It should be read in conjunction with our Form 10-K for the year 2008, our Form 10-Qs for the first and second quarters of 2009 and our Form 8-Ks filed with the Securities and Exchange Commission (SEC), all of which a
Slide 27: America's small business insurance specialist
America’s small business insurance specialist.” EMPLOYERS’ A [ i | 1493 awa 43499
Slide 28: Organization
Organization Employers Holdings, Inc. Employers Insurance Company of Nevada Employers Compensation Insurance Company Employers Preferred Insurance Company Employers Occupational Health, Inc . Employers Assurance Company Elite Insurance Services EIG Services, Inc. Pinnacle Benefits, Inc. AmSERV, Inc.
Slide 29: Selected Operating Results
Income Statement ($ million) 2005 2006 2007 2008 Q 1 2009 Q 2 2009 Gross Written Premium $ 458.7 $ 401.8 $ 350.7 $ 322.9 $ 128.1 $91.0 Net Written Premium 439.7 387.2 338.6 312.8 124.7 88.3 Net Earned Premium 438.3 393.0 346.9 328.9 111.6 104.4 Net Investment Income 54.4 68.2 78.6 78.1 23.3 23.1 Net
Slide 30: Computation of Adjusted Expense Ratio on Level Premiums
COMPUTATION OF ADJUSTED EXPENSE RATIO ON LEVEL PREMIUMS Six Months Six Months Ending Ending 6/30/2008 6/30/2009 (millions) Earned Premium Employers 149.7 $ 216.0 Acquired operations 100.7* - 250.4 D 216.0 A Underwriting & Other Operating Expenses 68.9 Policyholder Dividends 3.9 Total Expenses 72.8 B
Slide 31: 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 +10.0% -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% -18.8% -3.0% -2.2% -4.6% +2.5% -6.0% +10.5% Regional Organization, Pricin
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