Employers Holdings Inc · NYSE:EIG
Employers — Investor Presentation (September 2010)
30 slides from Employers's investor presentation, Sep 3, 2010
Slide 1: Employers Holdings, Inc. Investor Presentation
Employers Holdings, Inc. Investor Presentation September, 2010
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 2009, our Form 10-Qs and our Form 8-Ks filed with the Securities and Exchange Commission (SEC), all of which are available on the “Investor Relations” s
Slide 3: Overview
· Specialty provider of workers’ compensation insurance · Coverage generally required by statute Ø Medical, temporary/permanent indemnity, death · Diversified: 30 states with concentrations in CA, FL, WI, IL and NV Ø Unique markets by state and area · Small “main street” businesses · Low-to-medium h
Slide 4: Selectively Expanding Footprint
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 GA Selectively Expanding Footprint NE SD ND WY NV WA ME NH MA CT WV OH LA VT NJ DE RI 1913 - 1999 State WC fund in NV Privatization Demutualization and IPO - entry into FL, IL and OR Acquisition, book of business in CA,
Slide 5: Recent Actions/Results
• Market cycle currently reflects competitive pricing/downward pressure on rates • High levels of unemployment/reduced work hours result in declining payroll/premium – Insured payroll down 16% year over year at June 30, 2010; NPW down 15.5% for the same period • Combined four regional operating unit
Slide 6: Market Penetration
$ million # policies Market Penetration Purchased Fremont Book of Business Purchased AmCOMP Incorporated Policy Count ‘02-’09 CAGR = 9.3% NPW ‘02-’09 CAGR = 10.2% * Trailing Twelve Months
Slide 7: Disciplined Risk Selection
Disciplined Risk Selection Hazard Group A Hazard Group B Hazard Group C Hazard Group D Hazard Group E Hazard Group F Hazard Group G Lower Risk Higher Risk EMPLOYERS = 83% of Total In Force Premium, Hazard Groups A - D % In Force Premiums, 12/31/09 EMPLOYERS Top 10 Classes EMPLOYERS Top 10 Classes NC
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
Strategic Partnerships Industry Focused Independent Agents and Brokers Unique Distribution Network • 1,600 in place • Strong relationships with agents • Two key partners Ø ADP Ø Anthem Blue Cross Restaurants and physicians are our top two classes of customers • California Restaurant Association prov
Slide 10: Increasing Points of Access
Increasing Points of Access Partnerships … a distribution advantage by expanding market reach and providing local knowledge … in high persistency … about 20% of in-force premiums at 6/30/10
Slide 11: Strong Retention Rates
Strong Retention Rates Strategic partnerships result in consistently higher retention rates * Trailing Twelve Months
Slide 12: Claims management capabilities
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 | + $5.9 million savings in 2009 | Rigorous quality assurance processes i + En
Slide 13: Financial Summary: Income Statement and Balance Sheet
INCOME STATEMENT ($ million except per share) Q 2 2010 Q 1 2010 Q 2 2009 Net premiums earned 78.2 79.3 104.4 Net investment income 20.6 21.3 23.1 GAAP net income 16.5 16.1 20.3 Net income before the LPT 12.1 11.7 16.0 Earnings per share before the LPT 0.29 0.27 0.34 BALANCE SHEET ($ million) 6/30/10
Slide 14: Loss Portfolio Transfer (LPT)
Loss Portfolio Transfer (LPT) Claims 6/30/1995 and prior - Approximately 3,500 claims open as of 6/30/10 with 4.5% closing each year Remaining liabilities at 6/30/10: $868.5 million
Slide 15: Return on Average Adjusted Equity, Increasing Book Value per Share
(Pro forma) (Pro forma) 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 * Trailing T
Slide 16: History of Reserve Strength
Reserve Review Reserve Development History of Reserve Strength Net reserves for workers’ comp industry estimated to be deficient by $9 Billion at 12/31/09 (1) (1) NCCI, “State of the Line” - May 6, 2010 - an increase of 50% from $6 billion in 2008 Net Calendar Year Reserve Releases for Prior Acciden
Slide 17: Strong Capital Position
Strong Capital Position ($ million) .75 to 1 NPW/Statutory Surplus Ratio $355 million extraordinary dividends to parent in 2008 Statutory surplus provides a solid basis for underwriting $150 million extraordinary dividends to parent in 2010
Slide 18: Prudent Capital Management
Statutory Surplus Investing in the Future Returning Capital to Shareholders Holding Company Flexibility at 6/30/10 Prudent Capital Management • Debt to total capital ratio - 12.8% • $62 million in cash and $364 million in securities • Generating capital to invest in operations/securities • Deploying
Slide 19: High Quality Investment Portfolio
$2.0 billion fair market value • 97% fixed maturities with an average weighted AA+ rating • Average book yield of 4.3% • Tax equivalent book yield of 5.5% • Effective duration of 4.8 • $364 million in securities at the holding company of which 90% were municipals • Managed by Conning Asset Managemen
Slide 20: High Quality Reinsurance
Program Structure, Effective 7/1/10 Reinsurance Management High Quality Reinsurance Reinsurers by Market
Slide 21: Summary of Financial Strength
Strong Underwriting Leverage Catastrophe Reinsurance Program Summary of Financial Strength Conservative Reserving High Quality Investment Portfolio .75 to 1 NPW to Surplus at 6/30/10 $2 billion - approximately 97% invested in fixed maturities with average weighted rating of AA+ Track record of reser
Slide 22: Key Strategies
FOCUS GROWTH CAPITAL Key Strategies • Target attractive small business market • Maintain disciplined risk selection, underwriting, pricing and claims operations • Focus on underwriting profitability • Selectively expand into additional markets • Increase penetration in current markets • Leverage inf
Slide 23: Key Strengths
Key Strengths • Strong underwriting franchise with established presence in attractive markets – 97 year operating history - attractive, underserved target market segment with growth opportunities • Unique, long-standing strategic distribution relationships • Conservative risk profile and prudent cap
Slide 24: Management and Investor Relations Contact
Douglas D. Dirks President & Chief Executive Officer Employers Holdings, Inc. William E. (Ric) Yocke Chief Financial Officer Employers Holdings, Inc. Analyst Contact: Vicki Erickson Vice President, Investor Relations Employers Holdings, Inc. (775) 327-2794 verickson@employers.com 10375 Professional
Slide 25: America’s small business insurance specialist.”
America’s small business insurance specialist.” EMPLOYERS’ A [ i | 1493 awa 43499
Slide 26: Stock Ownership Limitations
Stock Ownership Limitations As a reminder to investors, Employers Holdings, Inc. (EMPLOYERS) owns four insurance companies, domiciled in three different states. These wholly-owned insurers are regulated by insurance commissioners and are subject to the statutes and regulations of the various states
Slide 27: Operating Organization
Operating Organization Employers Holdings, Inc. Employers Insurance Company of Nevada Employers Compensation Insurance Company Employers Preferred Insurance Company Employers Occupational Health, Inc . Employers Assurance Company Employers Group, Inc.
Slide 28: Selected Operating Results
Income Statement ($ million) 2005 2006 2007 2008 2009 Gross Written Premium $ 451.4 $ 386.8 $ 351.8 $ 318.4 $ 379.9 Net Written Premium 432.5 372.2 339.7 308.3 368.3 Net Earned Premium 438.3 393.0 346.9 328.9 404.2 Net Investment Income 54.4 68.2 78.6 78.1 90.5 Net Income 137.6 171.6 120.3 101.8 83.
Slide 29: Calendar Year Combined Ratio (GAAP)
(LPT is 10%) (LPT is 4.9%) (LPT is 5.2%) (LPT is 5.6%) (LPT is 4.5%) (LPT is 5.5%) (LPT is 5.6%) Calendar Year Combined Ratio (GAAP) 84.9% 72.6% 85.6% 91.5% 102.5% 111.3% 107.4%
Slide 30: Regional Pricing Trends
FL NM MD TX OK KS MT CO UT ID AZ NV CA OR KY PA VA IN IL NC TN SC AL AR MO IA MN MS GA +3.0% -7.4% -4.2% -9.7% -2.6% -18.8% +7.0% -4.5% -2.8% -7.6% -7.5% -6.4% -6.8% -4.2% +0.7% WESTERN EASTERN NE SD ND WY WA NY MA CT WV OH LA VT NJ Regional Pricing Trends: 9/30/09 thru 9/01/10 Corporate Headquarter
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