Employers Holdings, Inc. Reports First Quarter Earnings and Announces Second Quarter Dividend
Reno, NV—May 04, 2011—Employers Holdings, Inc. ("EHI" or the "Company") (NYSE:EIG) today reported first quarter 2011 net income of $8.3 million or $0.21 per diluted share compared with $16.1 million or $0.38 per diluted share in the first quarter of 2010, a decrease of $7.8 million or $0.17 per 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 (the Company's non-GAAP measure described below) was $3.8 million or $0.10 per diluted share in the first quarter of 2011 compared with $11.7 million or $0.27 per diluted share in the first quarter of 2010.
As of March 31, 2011, the Company had a calendar year combined ratio of 116.9% (122.4% before the LPT), an increase of 11 percentage points from the first quarter of 2010 combined ratio of 105.9% (111.3% before the LPT). On an accident quarter basis, the Company had a combined ratio before the LPT of 121.4% in the first quarter of 2011 compared to 125.3% in the first quarter of 2010, an improvement of 3.9 percentage points (see Page 12 for the accident year reconciliations).
Douglas D. Dirks, President and Chief Executive Officer of EHI, commented: "Lower earnings and the higher calendar year combined ratio in the quarter are the direct result of a 47% increase in losses and loss adjustment expense (LAE). In the current quarter, we reported no prior period favorable reserve development compared to $11.1 million of favorable development in the first quarter of 2010. Additionally, we increased our current period loss provision rate by 6.3 points relative to last year's first quarter. The rise in our current year loss provision rate largely reflects increasing medical and indemnity costs in our largest state, California, which represented over half of our book of business at the end of the first quarter. We believe rising claims costs are related to increased litigation, increased medical utilization and higher disability awards, especially in Southern California. Our increased provision rate reflects both the claims cost trends reported by the California Workers' Compensation Insurance Rating Bureau (WCIRB) as well as our own views on increased frequency and severity. Nationally, continuing high levels of unemployment have impacted our ability to return injured employees to work, thereby lengthening duration and increasing total claim costs. Despite these trends, on an accident year basis, our combined ratio before impact of the LPT improved nearly four points year over year, as underwriting expense savings offset deteriorating loss experience."
Dirks continued: "Positives in the quarter include a year over year increase of 26.8% in written premium and a 4.0% increase in earned premium, both resulting from the implementation of our growth strategies. We added 5,027 policies since March 31, 2010 for a twelve-month policy count increase of 11.7%. We expanded our rapid quote technology to all thirty states in our geographic footprint. In addition to expanding premium and policies, our underwriting and other operating expenses decreased 20.4%, to $25.7 million in the first quarter of 2011 from $32.3 million in the first quarter of 2010, as headcount declined by approximately 225 positions since March 31, 2010. We grew adjusted book value three cents per share since year-end 2010 due to accretive share repurchases of $8.6 million in the first quarter of 2011."
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