Employers holdings, inc. reports third quarter 2013 earnings and
declares fourth quarter 2013 dividend
Reno, nev.--(business wire)--employers holdings, inc. (“ehi” or the “company”) (nyse:eig) today reported third quarter 2013 net income of $27.6 million or $0.86 per diluted share. net income in the third quarter of 2012 was $7.8 million or $0.25 per diluted share. net income includes amortization of the deferred reinsurance gain related to the loss portfolio transfer (“lpt”) agreement. consolidated net income before the impact of the lpt deferred reinsurance gain (the company's non-gaap measure described below) was $13.6 million or $0.42 per diluted share in the third quarter of 2013 and $2.7 million or $0.09 per diluted share in the third quarter of 2012. the third quarter 2013 combined ratio was 96.2% and 104.7% before the impact of the lpt deferred reinsurance gain, compared with 109.0% and 112.9% before the impact of the lpt deferred reinsurance gain for the third quarter of 2012. year over year, the combined ratio improved 12.8 percentage points on a gaap basis and 8.2 percentage points before the impact of the lpt. president and chief executive officer douglas d. dirks commented on the results: “our strong financial performance continued into the third quarter. net income before the lpt increased $0.33 per diluted share relative to the third quarter of last year. our substantive growth in earnings reflects the 25% year over year increase in net premiums earned, solid improvement in our underwriting performance and tax benefits related to a reassignment of reserves from non-taxable to taxable years. our combined ratio before the lpt improved 8.2 points relative to the third quarter of 2012, and 1.4 points compared to the second quarter of this year. year over year net rate increases of 9.3% at quarter-end continued to more than offset increases in loss costs. we are still seeing improvement in our loss and loss adjustment expense (lae) ratio, but the rate of improvement was lower than in the first and second quarters of this year. we lowered our provision rate for losses in the third quarter by 0.2 points relative to the second quarter of this year and 4.4 points relative to the third quarter of last year. as rate trends continue to exceed loss trends, we would anticipate continuing improvement in our loss and lae ratio." dirks continued: "in the third quarter, our analysis of ultimate losses resulted in a reallocation of $24.3 million of carried reserves from tax-exempt to taxable accident years. this reallocation was a cumulative adjustment and was largely the result of loss trends observed in 2012 and 2013. the reallocation does not reflect a change in loss trends and had no impact on total net carried reserves." dirks concluded: “as you know, our company has a history of setting ambitious goals and meeting them. over the past three years, our focus has been to increase policy count, premium and add new agents. we have more than met those goals, yet we believe that we can always do better. we are now beginning the first phase of a new long-term initiative focusing on customer service and process improvement, with the goal of further reducing our expense ratio while bettering customer satisfaction. this initiative includes a re-structuring and centralization of our insurance operations. we will discuss this project more as it unfolds." fourth quarter dividend the board of directors declared a fourth quarter 2013 dividend of six cents per share. the dividend is payable on december 4, 2013 to stockholders of record as of november 20, 2013. conference call and web cast; form 10-q; supplemental portfolio listing the company will host a conference call on thursday, november 7, 2013, 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 21661548. international callers may dial (617) 801-6888. ehi expects to file its form 10-q for the quarter ended september 30, 2013, with the securities and exchange commission (“sec”) on or about thursday, november 7, 2013. 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 by cusip in the calendar of events, third quarter “investors” section of its web site at www.employers.com. discussion of non-gaap financial measures this earnings release includes non-gaap financial measures used to analyze the company's operating performance for the periods presented. 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. in addition, 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. 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. net income before impact of the lpt agreement. 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. deferred reinsurance gain–lpt agreement (deferred gain). this 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. 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. 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. equity including deferred gain. equity including deferred gain is total equity plus the deferred gain. 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. 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 regarding the company's future operations, growth and pricing strategies, and financial and operating performance, as well as underwriting performance, trends in loss and lae ratios, expectations regarding provision rate, achievement of corporate goals and long-term initiatives and the impact of those initiatives on operations. 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 © 2013 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.
