Eastern Insurance Plc · DSEBD:EASTERNINS
Eastern Insurance — Keefe, Bruyette & Woods 2011 Insurance Conference
25 slides from Eastern Insurance's conference presentation, Sep 9, 2011
Slide 1: Eastern Insurance Holdings, Inc. KBW 2011 Insurance Conference
Exhibit 99.1 Eastern Insurance Holdings, Inc. NASDAQ: EIHI Keefe, Bruyette & Woods 2011 Insurance Conference September 7, 2011 Michael Boguski President and Chief Executive Officer and Kevin Shook Executive Vice President, Treasurer and Chief Financial Officer
Slide 2: Michael Boguski, President and Chief Executive Officer
Michael Boguski President and Chief Executive Officer Page 2
Slide 3: Review of 2010 EIHI Strategic Initiatives
Review of 2010 EIHI Strategic Initiatives • EIHI strategic plan focused on driving the organization to a pure specialty workers’compensation platform • A.M. Best Company financial rating upgrade ofcompensation workers’ companies to “A” (excellent) with a stable outlook in a very difficult insurance
Slide 4: EAIG Workers' Compensation Highlights Quarter
EAIG Workers’ Compensation Highlights Quarter – Ended June 30, 2011 • Direct written premium of $32.9 million for the three months ended June 30, 2011, and $26.6 million for the three months ended June 30, 2010 • GAAP Workers’ Compensation Insurance Segment combined 90.4% ratio – • Consolidated net
Slide 5: EAIG Geographic Footprint
EAIG Geographic Footprint Alabama Arkansas • Direct written premium of District of Columbia Delaware $126.8 million for the year Florida ended 12.31.10, and $110.1 Georgia Illinois million for the year ended Indiana 12.31.09 Iowa Kentucky • Direct written premium of Louisiana $79.5 million for the s
Slide 6: Workers' Compensation Geography Diversification
EAIG Workers’ Compensation Geography Diversification Maryland, 2.4% Delaware, 1.5% Tennessee, 1.3% Delaware, 0.7% Maryland, 0.4% Virginia, 3.5% Other, 2.7% North Carolina, 5.1% Indiana, 12.5% Pennsylvania, 70.9% Pennsylvania, 98.9% Percentages as of Percentages as of June 30, 2011 June 30, 2006 •Ope
Slide 7: Workers' Compensation Risk Diversification (Traditional)
EAIG Workers’ Compensation Risk Diversification Top 10 Classes (Traditional) Exposure Base: PA, DE, MD, VA, NC, SC Restaurant 3.6% Retirement/Life Care Community 3.0% Nursing Homes- Skilled 3.7% Clerical / Office 18.7% SalesmenOutside - 4.1% Colleges/Schools 5.6% Doctors / Dentists 8.2% Auto Dealers
Slide 8: Workers' Compensation Risk Diversification (Alternative Markets)
EAIG Workers’ Compensation Risk Diversification Top 10 Classes (Alternative Markets) Exposure Base: PA, DE, MD, VA, NC, SC Ambulance Service - Colleges / Schools Non-Volunteer 2.3% 2.0% Grocery StoreRetail - Clerical / Office 16.8% 3.7% Nursing Homes - Skilled 4.0% SalesmenOutside - 6.1% Auto Dealer
Slide 9: Workers' Compensation Product Line Diversification
Workers’ Compensation Product Line Diversification Broad Product Spectrum Retrospective • Guaranteed Cost Policies Deductible, 4.2% Rating, 2.4% • Loss-Sensitive Dividend Plans Policyholder • Large and Medium Deductible Dividend, 11.4% Plans • Retrospective Rating Plans • ParallelPay®(Pay As You Gua
Slide 10: ParallelPay (Pay As You Go)
ParallelPay® (Pay As You Go) • ParallelPay® program has been very well received by agents and customers since its release in April of 2009 • Direct written premium of $32.4 million (908 individual policies) from the inception of the product to June 30, 2011 • New business writings represent $12.2 mi
Slide 11: Business Model
EAIG Business Model • Disciplined individual account underwriting with focus on rate adequacy in rural territories • Broad product spectrum • Broad underwriting diversification by class code and market segment • Extensive medical cost containment strategies • Proactive claims management and strategi
Slide 12: Workers' Compensation Key Operating Statistics, Six Months Ended June 30, 2011
Workers’ Compensation Key Operating Statistics for the Six Months Ended June 30, 2011 (1) Risk Management Underwriting: Workers’Compensation combined ratio 91.3% • Traditional in-force exposure - Workers’Compensation calendar year loss ratio 66.4% $6.2 billion Direct written premium $79.5 million Di
Slide 13: Pennsylvania Workers' Compensation Market Share (Top 20)
Pennsylvania Workers’ Compensation Market Share (Top 20) (dollars in thousands) 2010 Gross Written Five Year Average Three Year Average Premium Loss Ratio Loss Ratio 1. Liberty Mutual Insurance Company $ 193,142 76.97% 72.11% 2. American International Group 153,488 86.78% 95.29% 3. Old Republic Insu
Slide 14: Indiana Workers' Compensation Market Share (Top 20)
Indiana Workers’ Compensation Market Share (Top 20) (dollars in thousands) 2010 Gross Written Five Year Average Three Year Average Premium Loss Ratio Loss Ratio 1. Liberty Mutual Insurance Company $ 91,671 62.02% 68.05% 2. Travelers Group 44,298 56.46% 54.85% 3. American International Group 35,861 7
Slide 15: North Carolina Workers' Compensation Market Share (Top 20)
North Carolina Workers’ Compensation Market Share (Top 20) (dollars in thousands) 2010 Gross Written Five Year Average Three Year Average Premium Loss Ratio Loss Ratio 1. Liberty Mutual Insurance Company $ 126,752 76.26% 75.70% 2. Hartford Insurance Group 92,343 66.88% 65.69% 3. Travelers Group 77,1
Slide 16: Kevin Shook, Executive Vice President, Treasurer and CFO
Kevin Shook Executive Vice President, Treasurer and Chief Financial Officer Page 16
Slide 17: Eastern Insurance Holdings, Inc. Financial Model
Eastern Insurance Holdings, Inc. Financial Model • Underwriting Profit • Active Capital – Underwriting, risk Management management and claims philosophy – Geographic expansion – Financial underwriting – Stock repurchases – Low expense ratio – Shareholder dividends • Investment Results • Strong Balan
Slide 18: Balance Sheet Strength
EAIG Balance Sheet Strength • 67.4% of June 30, 2011 assets are in cash and invested assets • Excellent collection history on premiums receivable • Strong reinsurer security • Unpaid loss and loss adjustment expense – Reserves recorded near high end of actuarial range – History of favorable workers’
Slide 19: Investment Portfolio Mix
Investment Portfolio Mix 21% Fixed Income Securities 5% Convertible Bonds Equity Securities 11% Other Long-Term Investments 55% Cash and Cash Equivalents 8% •Conservative investment strategy (76% fixed income and cash) •Preservation of capital strategy •High quality securities Total Cash and Investe
Slide 20: EIHI Fully Diluted Book Value Performance
EIHI Fully Diluted Book Value Performance Page 20
Slide 21: Workers' Compensation Combined Ratio History
EAIG Workers’ Compensation Combined Ratio History 100.0% 96.0% 92.2% 90.4% 87.7% 90.0% 79.1% 80.2% 80.0% 70.0% 65.6% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2006 2007 2008 2009 2010 Q1 2011 Q2 2011 •2010 A.M. Best composite projected combined ratio 121.5 percent Page 21
Slide 22: Direct Written Premium Growth Rates
EAIG Direct Written Premium Growth Rates $140.0 15.2% $120.0 8.0% 10.4% $100.0 7.7% 8.9% 13.6% $80.0 20.6% $60.0 19.8% $40.0 23.7% $20.0 $- Percentages as of June 30, 2011 •United States workers’ compensation industry direct written premium writingsfrom decreased $55 billion in 2005 to $36 billion i
Slide 23: Workers' Compensation Claim Closing Patterns
EAIG Workers’ Compensation Claim Closing Patterns Results as of June 30, 2011 Page 23
Slide 24: Eastern Insurance Holdings, Inc. Capital Position
Eastern Insurance Holdings, Inc. Capital Position Reported Implied Target Implied Capital 6/30/2011 Book Value Book Value Unallocated Tangible BV NPW(1) NPW/ Surplus Requirement GAAP Equity Per Share Per Share Capital Per Share Workers' compensation insurance $ 101,582 1.25 $ 81,266 $ 91,717 $ 11.14
Slide 25: Eastern Insurance Holdings: fresh outlooks. better outcomes.
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