Employers Holdings Inc · NYSE:EIG
Employers — Investor Presentation (June 2010)
29 slides from Employers's investor presentation, Jun 14, 2010
Slide 1: Employers Holdings, Inc. Investor Presentation
Employers Holdings, Inc. Investor Presentation June, 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 · 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 hazard exposur
Slide 4: Key Strategies: Focus, Growth, Capital
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 5: Selectively Expanding Footprint
CA, 49.6% Other, 27.4% 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 FL, 6.5% WI, 5.2% NV, 6.0% IL, 5.3% 2008 Acquisition of AmCOMP Incorporated, entry into IA 2007 Demutualization and IPO - entry into FL, IL and OR 2005 Formation of mutual hold co Selectively E
Slide 6: Market Penetration
2002 2003 2004 2005 2006 2007 2008 2009 Q 1 2010 (TTM*) 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 In Force Policies Net Premiums Written $ million # policies Market Penetration Purchased Fremont Book of Business Purchased AmCOMP Incorporated Policy Count ‘02-’09 CAGR = 9.3
Slide 7: Disciplined Risk Selection
A Restaurants 9.9 C Physicians/Clerical 7.8 D Automobile Services 6.6 B Wholesale Stores 4.3 B College Employee 2.6 B Retail Stores 2.3 D Machine Shops 1.8 C Clerical 1.7 B Hotel Employees 1.6 C Grocery/Provision Stores 1.6 Total Top 10 40.2 12% 21% Disciplined Risk Selection Hazard Group A Hazard G
Slide 8: Delivering Superior Loss Ratios
75.2% 56.4% 61.4% 58.3% 37.9% 46.5% 47.1% 57.5% 56.3% Delivering Superior Loss Ratios Consistently Lower Loss and LAE Ratios than the Industry 0% 25% 50% 75% 100% 2002 2003 2004 2005 2006 2007 2008 2009 Q 1 2010 Losses & LAE (before LPT deferred reinsurance gain) Industry Losses & LAE Ratio A.M. Bes
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 3/31/10 Largest payroll services company in the U.S. Partner since 2002 - business originates with ADP’s field sales s
Slide 11: Strong Retention Rates
89% 90% 89% 85% 81% 78% Strong Retention Rates Strategic Partnerships Result in Consistently Higher Retention Rates * Trailing Twelve Months 92% 93% 92% 88% 88% 89% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2005 2006 2007 2008 Overall retention Strategic Markets
Slide 12: Superior Claims Management
Superior Claims Management In-house medical management staff Comprehensive fraud program Rigorous quality assurance processes Dedicated subrogation unit Pharmacy benefit management program Claims professionals average over a decade of experience • Coordinate care and manage medical costs • URAC accr
Slide 13: Key Highlights: Q1 2010 Income Statement and Balance Sheet
INCOME STATEMENT ($ million except per share) Q 1 2010 Q 1 2009 Net premiums earned 79.3 111.6 Net investment income 21.3 23.3 GAAP net income 16.1 20.9 Net income before the LPT 11.7 16.5 Earnings per share before the LPT 0.27 0.34 BALANCE SHEET ($ million) Total investments 2,027.4 2,029.6 Cash an
Slide 14: Strong Capital Position
215 339 431 531 640 698 578 661 550 2002 2003 2004 2005 2006 2007 2008 2009 Q 1 2010 Strong Capital Position ($ million) .6 to 1 NPW/Statutory Surplus Ratio $355 million extraordinary dividends to parent in 2008 Strong Growth in Statutory Surplus Provides a Solid Basis for Underwriting On June 3, 20
Slide 15: Loss Portfolio Transfer (LPT)
Contract ($ 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 3/31/10 $602.5 Accounting at 3/31/10 ($ million) Statutory Surplus Created $602.5 Cumulative Amortization To Date (218
Slide 16: Return on Average Adjusted Equity, Increasing Book Value per Share
Book Value per Share (2) $14.94 $16.21 $17.43 $20.67 $20.91 $12.14 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 calculat
Slide 17: Consistently Profitable Underwriting
58.3% 37.9% 46.5% 47.1% 57.5% 56.3% 10.7% 12.3% 12.8% 13.3% 8.9% 12.5% 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% 102.5% Expense ratio include
Slide 18: History of Reserve Strength
Reserve Review Reserve Development $69.2 $37.6 $78.1 $107.1 $60.0 $11.1 $51.4 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 Calen
Slide 19: Prudent Capital Management
Share Repurchases Investing in the Future Returning Capital to Shareholders Holding Company Flexibility at 3/31/10 Dividends Prudent Capital Management • Debt ratio - 12.9% – Wells Fargo Secured Credit Facility - $100 million remaining – $32 million of acquired surplus notes • $300 million in cash a
Slide 20: 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 5.00 • Managed by Conning Asset Management High Quality Investment Portfolio Portfolio at 3/31/10 U.S . treasury securiti
Slide 21: High Quality Reinsurance
Program Structure, Effective 7/1/09 Reinsurance Management High Quality Reinsurance Reinsurers by Market 100% rated A or better Long-term relationships with load reinsurers Maintain a high quality reinsurance program Focus on select small business provides a natural dispersion of exposure across mar
Slide 22: Summary of Financial Strength
Summary of Financial Strength Strong Underwriting Leverage Conservative Reserving High Quality Investment Portfolio Catastrophe Reinsurance Program .6 to 1 NPW to Surplus at 3/31/10 $2 billion - nearly 97% invested in fixed maturities with average weighted rating of AA+ Track record of reserve stren
Slide 23: Key Strengths
Key Strengths • Strong underwriting franchise with established presence in attractive markets – 97 year operating history - attractive, underserved target market segment with growth opportunities • Unique, long-standing strategic distribution relationships • Conservative risk profile and prudent cap
Slide 24: Management and Analyst Contact
Douglas D. Dirks President & Chief Executive Officer Employers Holdings, Inc. William E. (Ric) Yocke Chief Financial Officer Employers Holdings, Inc. Analyst Contact: Vicki Erickson Vice President, Investor Relations Employers Holdings, Inc. (775) 327-2794 verickson@employers.com 10375 Professional
Slide 25: Stock Ownership Limitations
Stock Ownership Limitations As a reminder to investors, Employers Holdings, Inc. (EMPLOYERS) owns four insurance companies, domiciled in three different states. These wholly-owned insurers are regulated by insurance commissioners and are subject to the statutes and regulations of the various states
Slide 26: Appendix
Appendix
Slide 27: Operating Organization
Operating Organization Employers Holdings, Inc. Employers Insurance Company of Nevada Employers Compensation Insurance Company Employers Preferred Insurance Company Employers Occupational Health, Inc . Employers Assurance Company Employers Group, Inc.
Slide 28: Selected Operating Results
Income Statement ($ 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: Regional Pricing Trends
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 PA VA WV NC TN AL AR LA GA MS SC FL SOUTHEAST +3.0% -7.4% -4.2% -9.7% -2.6% -18.8% +7.0% -6.8% -2.8% -7.6% -7.5% -6.4% -4.2% Regional, Pricing Trends 9/30/09 thru 7/01/10 ME NH CT VT NJ RI NE ND WY WA Corporate
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