Employers Holdings Inc · NYSE:EIG
Employers — Investor Presentation (November 2007)
63 slides from Employers's investor presentation, Nov 29, 2007
Slide 1: Management Presentation
November, 2007 Management Presentation
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Slide 3: 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 2006, our Form 10-Q for the second and third quarters of 2007 and our Form 8-Ks filed with the Securities and Exchange Commission (SEC), all of which ar
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Slide 5: Contents
Contents Page Corporate Overview Overview 4 Key Strengths 5 Financial Snapshot 6 Strategies 7 Expanding Geographic Footprint 8 Seasoned Executives with Extensive Experience 9 Insurance Operations Disciplined Underwriting – Five Basic Elements 11 Focus on Low to Medium Hazard Groups 12 Customer Selec
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Slide 7: Corporate Overview
America’s small business insurance specialist. Corporate Overview
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Slide 9: Overview
Overview Specialty provider of workers’ compensation insurance 18th largest private writer in the U.S. (1) Business 8th largest private writer in California (1) 2nd largest writer in Nevada (1) Small businesses in low to medium hazard industries Distribution through independent agents and strategic
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Slide 11: Key Strengths
Key Strengths Established enterprise with 94 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 - stron
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Slide 13: Financial Snapshot
Financial Snapshot ($ million) Net Premium Written Statutory Surplus Premium growth has declined due to California rate Strong growth provides a solid basis for underwriting decreases 500 440 418 800 682 673 387 655 400 640 600 531 300 298 431 339 87 400 200 187 224 82 200 100 93 0 0 2002 2003 2004
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Slide 15: Strategies
Strategies Target attractive, underserved small business market Focus on Profitability Maintain disciplined risk selection, underwriting and pricing Pursue Expand in current markets and in our new states Organic Growth Leverage infrastructure, technology and systems Opportunities Utilize existing an
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Slide 17: Expanding Geographic Footprint
Expanding Geographic Footprint 1.3% WA 1.9% MT ME 2.3% NEW STATES ND Florida, Oregon, OR MN VT NH 3.5% Texas, Arizona ID SD WI MA and Illinois = 1.3% NY WY MI CT RI IA PA NV NE NJ IL IN OH MD DE UT CO WV CA KS VA MO 19.2% KY NC AZ TN OK AR SC 70.5% NM MS AL GA TX LA FL California Nevada Colorado Uta
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Slide 19: Seasoned Executives with Extensive Experience
Seasoned Executives with Extensive Experience Experience Name Title (Years) Douglas D. Dirks Chief Executive Officer 22 Martin J. Welch President and Chief Operating Officer 29 William E. Yocke EVP, Chief Financial Officer 31 T. Hale Johnston SVP, President of Pacific Region 16 David M. Quezada SVP,
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Slide 21: Insurance Operations
—_—_—_ America’s small business insurance specialist.” Insurance Operations
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Slide 23: Disciplined Underwriting Five Basic Elements
Disciplined Underwriting Strong Five Basic Elements Underwriting Culture Focused Guidelines and Consistent Local Knowledge Automated Approach Disciplined Underwriting Pricing of Risk Selection Individual Risks Expertise 37.9% statutory loss and LAE ratio in 2006 11
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Slide 25: Focus on Low to Medium Hazard Groups
Focus on Low to Medium Hazard Groups % of Premiums Written, 12/31/06 EMPLOYERS Industry (1) 7% 1% 5% 4% Hazard Group A Lower Risk Hazard Group B Hazard Group C 11% Hazard Group D 10% 14% Hazard Group E 19% 23% Hazard Group F 13% Hazard Group G Higher Risk 26% 20% 35% 12% Hazard Groups A through D EM
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Slide 27: Customer Selection
Customer Selection Top Ten Classes in 2006 Hazard Direct Premiums Percent of Group Class Written (000s) Total A Restaurants $ 27,654 7.1% C Physicians & Clerical 24,858 6.4 B Store: Wholesale 18,854 4.8 B College: Professional Employees & Clerical 11,590 3.0 B Store: Retail 11,189 2.9 C Clerical Off
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Slide 29: Focused Marketing and Distribution
Focused Marketing and Distribution Independent Agents and Brokers Strategic Distribution Partners PACIFIC REGION WESTERN REGION STRATEGIC REGION California Nevada, Colorado, Utah, Largely ADP & Wellpoint; Montana, Idaho, Texas, added E-CHX in Qtr 4, 2006 Arizona, Illinois, Oregon, Primarily Californ
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Slide 31: Strategic Distribution Partners
Strategic Distribution Partners Largest payroll services company in the Largest group health carrier in California U.S. with over 450,000 clients Partner since entering California market Partner since entering California market in 2002 in 2002 Business originated by Wellpoint’s health Business origi
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Slide 33: In Force Policy Count
In Force Policy Count 35,000 33,027 31,902 30,922 29,742 30,000 27,686 24,967 26,005 Solid in force policy count growth 23,657 25,000 continued in the third quarter, 2007 20,000 33,027 at 9/30/07 29,311 at 9/30/06 15,000 Total increase of 3,716 or 10,000 12.7% 5,000 0 2002 2003 2004 2005 2006 3/31/0
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Slide 35: Workers' Compensation Industry
Workers’ Compensation Industry 2002: EMPLOYERS 150% entry into California 125% 100% 75% 50% 25% Historical Pure Loss Ratio 0% '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 California Total U.S. Source: WCIRB as of 09/30/06 (California); Insurance Information Institute as of 12/31/05 (Total U.S.) 17
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Slide 37: California Rates and Rate Setting
California Rates and Rate Setting Workers’ Compensation Insurance Rating Bureau (WCIRB) Recent Commissioner Ordered recommended increase of 5.2% in October, 2007 Advisory Pure Premium Changes Company’s choice to implement rate changes January 1, 2004 -14.9% Internal analyses are compared to Bureau’s
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Slide 39: Insurance Operations Summary
Insurance Operations Summary High performing insurance operation, built upon four key elements A highly focused customer base A disciplined underwriting culture An efficient – and scalable – infrastructure Strong producer and strategic partner relationships, providing us with: broader access to mark
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Slide 41: Financial Results
—<_—<—<—<<s America’s small business insurance specialist.” Financial Results
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Slide 43: Four Key Elements of Our Financial Strength
Four Key Elements of Our Financial Strength 0.5:1 NPW / Surplus Surplus of Conservative Track record of (Trailing 12 months NPW $673MM Reserving reserve strength at 9/30/07) at 9/30/2007 Approximately 90% fixed High Quality Catastrophe Coverage up to maturity with average Investment Reinsurance $200
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Slide 45: 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 Contrac
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Slide 47: Selected Operating Results
Selected Operating Results $ Million Q1 Q2 Q3 YTD 12/31/05 12/31/06 2007 2007 2007 2007 Income Statement Data Gross Premiums Written $ 458.7 $ 401.8 $ 96.5 $ 84.6 $ 90.3 $ 271.3 Premiums are Net Premiums Written 439.7 387.2 93.2 81.5 87.3 262.0 declining due to California rate Net Premiums Earned 43
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Slide 49: Earnings and EPS
Earnings and EPS $ Million Q1 Q2 Q3 YTD (except per share data) 12/31/05 12/31/06 2007 2007 2007 2007 GAAP Net Income $ 137.6 $171.6 $27.9 $30.8 $29.9 $88.5 Less: LPT Deferred Gain Amortization (43.8) (19.4) (4.6) (4.6) (4.6) (13.7) Net Income Before LPT $ 93.8 $ 152.2 $ 23.3 $ 26.2 $ 25.3 $ 74.8 EP
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Slide 51: Underwriting Profitability
Underwriting Profitability Excluding reserve COMBINED RATIO 12/31/05 12/31/06 YTD development for 9 2007 months, 2007 (1) Loss & LAE Ratio 48.3% 33.0% 42.4% 59.0% Less: Impact of LPT (2) 10.0% 4.9% 5.2% 5.2% Loss & LAE Ratio (excl. LPT) 58.3% 37.9% 47.6% 64.2% Commission Expense Ratio (3) 10.7% 12.3
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Slide 53: Reinsurance Program
Reinsurance Program $200M $50M xs $150M Catastrophe per Occurrence Expires 7/1/08 Fifth Excess of Loss Layer $150M $50M xs $100M Priced annually Catastrophe per Occurrence Fourth Excess of Loss Layer $100M Includes terrorism, except nuclear, $50M xs $50M Catastrophe per Occurrence biological, chemic
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Slide 55: Investment Portfolio
Investment Portfolio $1.7 billion of investment securities Asset-backed Equities U.S. Treasury - Less than .03% related to Commercial Securities 6.3% sub-prime Mortgage- Securities 1.2% 8.2% backed Securities - Less than 6% related to U.S. Agency financials 2.8% Securities 7.9% Approximately 90% Mor
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Slide 57: Capital Management
Capital Management Holding Company Capital Management Strong Capital Position Cash Flow Tools $38 million ordinary Shareholder dividends $771 million GAAP dividend capacity $0.06 per share adjusted equity at (unassigned surplus at quarterly dividend 9/30/2007 12/31/2006), plus Three quarters $9.7 mi
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Slide 59: Summary
America’s small business insurance specialist. Summary EIG
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Slide 61: Summary
Summary Established enterprise with 94 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 - strong bala
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Slide 63: Douglas D. Dirks, President & Chief Executive Officer
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 9790 Gateway Drive Employers Holdings, Inc. Reno, NV. 89521-5906 (775) 327-2794 (77
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