Employers holdings, inc. reports third quarter 2015 earnings and
declares fourth quarter 2015 dividend
Reno, nev.--(business wire)--employers holdings, inc. (“ehi” or the “company”) (nyse:eig) today reported net income of $24.5 million, or $0.75 per diluted share, for the quarter ended september 30, 2015 compared to $15.2 million, or $0.47 per diluted share, in the prior year quarter. net income before the impact of the loss portfolio transfer ("lpt") was $21.8 million, or $0.67 per diluted share, in the current quarter compared to $10.4 million, or $0.32 per diluted share, in the prior year quarter. operating income in the current quarter was $20.6 million, or $0.63 per diluted share, compared to $9.3 million, or $0.29 per diluted share, in the prior year quarter. a reconciliation of non-gaap to gaap metrics is included in the financial tables accompanying this release. key highlights(1) operating income per diluted share (1) see glossary of financial measures and reconciliation of non-gaap financial measures to gaap for additional definitions and calculations. (2) book value per share is stockholders' equity including the deferred gain divided by the number of common shares outstanding. president and chief executive officer douglas dirks commented on the results: “we again delivered strong results in the third quarter, reflecting the continued success of the pricing and underwriting initiatives we implemented last year. we expanded underwriting margin in the quarter while prudently managing our expenses, increasing invested assets and investing in technology. our underwriting profit before the lpt grew to $7.9 million in the quarter and our combined ratio was 95.6%, an improvement of 8.8 percentage points compared to the third quarter of last year.” dirks continued: “our strategy remains focused on growth in profitable customer classes both in and outside of california. in line with our strategic initiatives, we continued to see reductions in our higher loss ratio business, particularly in southern california. consequently, our overall in-force premium, policies and payroll exposure flattened in the quarter. in states outside of california, our in-force premium grew 4%, and our policies and payroll exposure grew 6% year-over-year. as rate levels moderated, our provision rate for current accident year losses declined just two basis points relative to the second quarter of this year. our loss trends remained stable relative to the second quarter.” dirks concluded: “we remain focused on profitability and delivering value to all of our stakeholders. our annualized quarterly operating return on equity was 9.9% and operating income more than doubled to 63 cents per diluted share compared to the third quarter of last year. our adjusted book value per share (excluding unrealized gains) of $26.23, which we believe is a conservative measure of value, grew 5% since the end of last year. we are pleased with our very strong financial and operating results in the quarter, which were in line with our expectations.” fourth quarter dividend the board of directors declared a fourth quarter 2015 dividend of six cents per share. the dividend is payable on november 24, 2015 to stockholders of record as of november 10, 2015. conference call and web cast; form 10-q; supplemental information the company will host a conference call on thursday, october 29, 2015, at 8:30 a.m. pacific daylight time. the conference call will be available via a live web cast on the company's web site at www.employers.com. an archived version will be available several hours after the call. the conference call replay number is (888) 286-8010 with a pass code of 12876563. international callers may dial (617) 801-6888. ehi expects to file its form 10-q for the quarter ended september 30, 2015, with the securities and exchange commission (“sec”) on or about thursday, october 29, 2015. the form 10-q will be available without charge through the edgar system at the sec's web site and will also be posted on the company's website, www.employers.com, through the “investors” link. the company provides a list of portfolio securities in the calendar of events, “investors” section of its website at www.employers.com. the company also provides investor presentations on its website. forward-looking statements in this press release, the company and its management discuss and make statements based on currently available information regarding their intentions, beliefs, current expectations, and projections of, among other things, the company's focus on certain customer classes and its overall strategy. certain of these statements may constitute "forward-looking" statements as that term is defined in the private securities litigation reform act of 1995. forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often identified by words such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "target," "project," "intend," "believe," "estimate," "predict," "potential," "pro forma," "seek," "likely," or "continue," or other comparable terminology and their negatives. ehi and its management caution investors that such forward-looking statements are not guarantees of future performance. risks and uncertainties are inherent in ehi's future performance. factors that could cause the company's actual results to differ materially from those indicated by such forward-looking statements include, among other things, those discussed or identified from time to time in ehi's public filings with the sec, including the risks detailed in the company's quarterly reports on form 10-q and the company's annual reports on form 10-k. except as required by applicable securities laws, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. the sec filings for ehi can be accessed through the “investors” link on the company's website, www.employers.com, or through the sec's edgar database at www.sec.gov (ehi edgar cik no. 0001379041). copyright © 2015 employers. all rights reserved. employers® and america's small business insurance specialist. ® are registered trademarks of employers insurance company of nevada. employers holdings, inc. is a holding company with subsidiaries that are specialty providers of workers' compensation insurance and services focused on select, small businesses engaged in low to medium hazard industries. insurance subsidiaries include employers insurance company of nevada, employers compensation insurance company, employers preferred insurance company, and employers assurance company, all rated a- (excellent) by a.m. best company. additional information can be found at: http://www.employers.com. unrealized (losses) gains during the period (net of tax (benefit) expense of $(5,900) and $(3,100) for the three months ended september 30, 2015 and 2014, respectively, and $(14,200) and $11,000 for the nine months ended september 30, 2015 and 2014, respectively) reclassification adjustment for realized gains in net income (net of taxes of $700 and $600 for the three months ended september 30, 2015 and 2014, respectively, and $1,800 and $5,000 for the nine months ended september 30, 2015 and 2014, respectively) september 30, 2015 december 31, 2014 fixed maturity securities at fair value (amortized cost $2,241,600 at september 30, 2015 and $2,186,100 at december 31, 2014) equity securities at fair value (cost $159,100 at september 30, 2015 and $97,800 at december 31, 2014) premiums receivable (less bad debt allowance of $11,600 at september 30, 2015 and $7,900 at december 31, 2014) common stock, $0.01 par value; 150,000,000 shares authorized; 55,451,417 and 54,866,802 shares issued and 32,078,443 and 31,493,828 shares outstanding at september 30, 2015 and december 31, 2014, respectively glossary of financial measures and reconciliation of non-gaap financial measures to gaap the company uses the following measures to evaluate its financial performance for the periods presented. certain measures are considered non-gaap financial measures under applicable sec rules and include or exclude certain items not ordinarily included or excluded in the most comparable gaap financial measures. these non-gaap financial measures exclude impacts related to the lpt agreement deferred reinsurance gain. the 1999 lpt agreement was a non-recurring transaction that does not result in ongoing cash benefits and, consequently, the company believes these non-gaap measures are useful in providing stockholders and management a meaningful understanding of the company's operating performance. some of these measures also exclude net realized gains, net of taxes, and/or accumulated other comprehensive income, net of taxes, and amortization of intangibles, net of taxes. management believes these are important indicators of how well the company creates value for its stockholders through its operating activities and capital management. these measures, as defined, are helpful to management in identifying trends in the company's performance because the items excluded have limited significance in current and ongoing operations or can be impacted by both discretionary and other economic factors and may not represent operating trends. the company strongly urges stockholders and other interested persons not to rely on any single financial measure to evaluate its business. the non-gaap measures are not a substitute for gaap measures and investors should be careful when comparing the company's non-gaap financial measures to similarly titled measures used by other companies. other companies may calculate these measures differently, and, therefore, these measures may not be comparable. reconciliations of non-gaap financial measures to their most directly comparable gaap measures are provided in the following discussion. net income before impact of the lpt agreement is net income less (a) amortization of deferred reinsurance gain–lpt agreement; (b) adjustments to lpt agreement ceded reserves; and (c) adjustments to contingent commission receivable–lpt agreement. operating income is net income before the impact of the lpt excluding net realized gains on investments, net of taxes, and amortization of intangibles, net of taxes. reconciliation of net income to net income before impact of the lpt and operating income reconciliation of net income per share to operating income per share deferred reinsurance gain–lpt agreement (deferred gain) reflects the unamortized gain from the lpt agreement. under gaap, this gain is deferred and amortized using the recovery method, whereby the amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries, except for the contingent profit commission, which is amortized through june 30, 2024. the amortization is reflected in losses and lae. stockholders' equity including the deferred gain is stockholders' equity including the deferred reinsurance gain–lpt agreement. average stockholders' equity including the deferred gain is the sum of stockholders' equity including the deferred gain at the beginning and end of each of the periods presented divided by two. average stockholders' equity is the sum of stockholders' equity at the beginning and end of each of the periods presented divided by two. adjusted stockholders' equity is stockholders' equity including the deferred gain, less accumulated other comprehensive income, net. average adjusted stockholders' equity is the average of stockholders' equity including the deferred reinsurance gain-lpt agreement, less accumulated other comprehensive income, net, for all quarters included in the calculation. book value per share is stockholders' equity including the deferred gain divided by the number of common shares outstanding. adjusted book value per share is adjusted stockholders' equity divided by the number of common shares outstanding. gaap book value per share is stockholders' equity divided by the number of common shares outstanding. reconciliation of stockholders' equity to stockholders' equity including the deferred gain and adjusted stockholders' equity operating return on equity is the ratio of annualized operating income to adjusted average stockholders' equity for the periods presented. adjusted return on equity is the ratio of annualized net income before the lpt to average stockholders' equity including the deferred gain. return on equity is the ratio of annualized net income to average stockholders' equity for the periods presented. reconciliation of operating return on equity and adjusted return on equity to return on equity calculation of combined ratio before the impact of the lpt agreement and reconciliation to current accident period combined ratio gross premiums written. gross premiums written is the sum of both direct premiums written and assumed premiums written before the effect of ceded reinsurance. direct premiums written represents the premiums on all policies the company's insurance subsidiaries have issued during the year. assumed premiums written represents the premiums that the insurance subsidiaries have received from an authorized state-mandated pool. net premiums written. net premiums written is the sum of direct premiums written and assumed premiums written less ceded premiums written. ceded premiums written is the portion of direct premiums written that are ceded to reinsurers under reinsurance contracts. the company uses net premiums written, primarily in relation to gross premiums written, to measure the amount of business retained after cession to reinsurers. losses and lae before impact of the lpt agreement. losses and lae less (a) amortization of deferred gain; (b) adjustments to lpt agreement ceded reserves; and (c) adjustments to contingent commission receivable–lpt agreement. losses and lae ratio. the losses and lae ratio is a measure of underwriting profitability. expressed as a percentage, it is the ratio of losses and lae to net premiums earned. commission expense ratio. the commission expense ratio is the ratio (expressed as a percentage) of commission expense to net premiums earned. underwriting and other operating expense ratio. the underwriting and other operating expense ratio is the ratio (expressed as a percentage) of underwriting and other operating expense to net premiums earned. combined ratio. the combined ratio represents a summary percentage of claims and expenses to net premiums earned. the combined ratio is the sum of the losses and lae ratio, the commission expense ratio, and the underwriting and other operating expense ratio. combined ratio before impacts of the lpt agreement. combined ratio before impacts of lpt is the gaap combined ratio before (a) amortization of deferred reinsurance gain–lpt agreement; (b) adjustments to lpt agreement ceded reserves; and (c) adjustments to contingent commission receivable–lpt agreement. book value per share. equity including deferred gain divided by number of shares outstanding. net rate. net rate, defined as total premium in-force divided by total insured payroll exposure, is a function of a variety of factors, including rate changes, underwriting risk profiles and pricing, and changes in business mix related to economic and competitive pressures.
