Nevada (State or other jurisdiction of incorporation or organization) | 04-3850065 (I.R.S. Employer Identification Number) | |
10375 Professional Circle, Reno, Nevada 89521 (Address of principal executive offices and zip code) |
Large accelerated filer R | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Class | October 31, 2012 | |
Common Stock, $0.01 par value per share | 30,724,286 shares outstanding |
Page No. | ||
Employers Holdings, Inc. and Subsidiaries | ||||||||
Consolidated Balance Sheets | ||||||||
(in thousands, except share data) | ||||||||
As of | As of | |||||||
September 30, 2012 | December 31, 2011 | |||||||
Assets | (unaudited) | |||||||
Available for sale: | ||||||||
Fixed maturity securities at fair value (amortized cost $1,737,949 at September 30, 2012 and $1,706,216 at December 31, 2011) | $ | 1,905,590 | $ | 1,852,699 | ||||
Equity securities at fair value (cost $80,897 at September 30, 2012 and $64,962 at December 31, 2011) | 128,158 | 98,046 | ||||||
Total investments | 2,033,748 | 1,950,745 | ||||||
Cash and cash equivalents | 243,242 | 252,300 | ||||||
Restricted cash and cash equivalents | 5,462 | 6,299 | ||||||
Accrued investment income | 18,595 | 19,537 | ||||||
Premiums receivable (less bad debt allowance of $6,380 at September 30, 2012 and $5,546 at December 31, 2011) | 225,064 | 160,443 | ||||||
Reinsurance recoverable for: | ||||||||
Paid losses | 9,299 | 10,729 | ||||||
Unpaid losses | 912,877 | 940,840 | ||||||
Funds held by or deposited with reinsureds | 2,677 | 1,102 | ||||||
Deferred policy acquisition costs | 40,343 | 37,524 | ||||||
Federal income taxes recoverable | — | 1,993 | ||||||
Deferred income taxes, net | 19,803 | 22,140 | ||||||
Property and equipment, net | 12,832 | 11,360 | ||||||
Intangible assets, net | 10,819 | 11,728 | ||||||
Goodwill | 36,192 | 36,192 | ||||||
Other assets | 16,933 | 18,812 | ||||||
Total assets | $ | 3,587,886 | $ | 3,481,744 | ||||
Liabilities and stockholders’ equity | ||||||||
Claims and policy liabilities: | ||||||||
Unpaid losses and loss adjustment expenses | $ | 2,304,424 | $ | 2,272,363 | ||||
Unearned premiums | 270,843 | 194,933 | ||||||
Policyholders’ dividends accrued | 3,364 | 3,838 | ||||||
Total claims and policy liabilities | 2,578,631 | 2,471,134 | ||||||
Commissions and premium taxes payable | 38,485 | 28,905 | ||||||
Accounts payable and accrued expenses | 16,834 | 14,994 | ||||||
Federal income taxes payable | 61 | — | ||||||
Deferred reinsurance gain—LPT Agreement | 341,564 | 353,194 | ||||||
Notes payable | 122,000 | 122,000 | ||||||
Other liabilities | 17,095 | 17,331 | ||||||
Total liabilities | 3,114,670 | 3,007,558 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.01 par value; 150,000,000 shares authorized; 54,074,236 and 53,948,442 shares issued and 30,724,086 and 32,996,809 shares outstanding at September 30, 2012 and December 31, 2011, respectively | 541 | 540 | ||||||
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued | — | — | ||||||
Additional paid-in capital | 322,739 | 318,989 | ||||||
Retained earnings | 372,390 | 358,693 | ||||||
Accumulated other comprehensive income, net | 139,686 | 116,719 | ||||||
Treasury stock, at cost (23,350,150 shares at September 30, 2012 and 20,951,633 shares at December 31, 2011) | (362,140 | ) | (320,755 | ) | ||||
Total stockholders’ equity | 473,216 | 474,186 | ||||||
Total liabilities and stockholders’ equity | $ | 3,587,886 | $ | 3,481,744 |
Employers Holdings, Inc. and Subsidiaries | ||||||||||||||||
Consolidated Statements of Comprehensive Income | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenues | (unaudited) | (unaudited) | ||||||||||||||
Net premiums earned | $ | 131,766 | $ | 92,601 | $ | 360,621 | $ | 263,156 | ||||||||
Net investment income | 17,506 | 19,584 | 54,188 | 60,383 | ||||||||||||
Realized gains on investments, net | 1,838 | 647 | 4,561 | 1,983 | ||||||||||||
Other income | 30 | 82 | 225 | 205 | ||||||||||||
Total revenues | 151,140 | 112,914 | 419,595 | 325,727 | ||||||||||||
Expenses | ||||||||||||||||
Losses and loss adjustment expenses | 98,255 | 67,438 | 267,471 | 191,009 | ||||||||||||
Commission expense | 14,865 | 10,968 | 44,541 | 32,368 | ||||||||||||
Policyholder dividends | 867 | 840 | 2,517 | 2,766 | ||||||||||||
Underwriting and other operating expenses | 29,280 | 25,334 | 90,935 | 77,212 | ||||||||||||
Interest expense | 896 | 906 | 2,656 | 2,731 | ||||||||||||
Total expenses | 144,163 | 105,486 | 408,120 | 306,086 | ||||||||||||
Net income before income taxes | 6,977 | 7,428 | 11,475 | 19,641 | ||||||||||||
Income tax benefit | (1,173 | ) | (4,355 | ) | (7,903 | ) | (8,738 | ) | ||||||||
Net income | $ | 8,150 | $ | 11,783 | $ | 19,378 | $ | 28,379 | ||||||||
Comprehensive income | ||||||||||||||||
Unrealized gains during the period (net of taxes of $8,639 and $9,118 for the three months ended September 30, 2012 and 2011, respectively, and $13,963 and $18,382 for the nine months ended September 30, 2012 and 2011, respectively) | $ | 16,045 | $ | 16,935 | $ | 25,933 | $ | 32,957 | ||||||||
Less: reclassification adjustment for realized gains in net income (net of taxes of $643 and $226 for the three months ended September 30, 2012 and 2011, respectively, and $1,595 and $694 for the nine months ended September 30, 2012 and 2011, respectively) | 1,195 | 421 | 2,966 | 1,289 | ||||||||||||
Other comprehensive income, net of tax | 14,850 | 16,514 | 22,967 | 31,668 | ||||||||||||
Total comprehensive income | $ | 23,000 | $ | 28,297 | $ | 42,345 | $ | 60,047 | ||||||||
Earnings per common share (Note 11): | ||||||||||||||||
Basic | $ | 0.26 | $ | 0.31 | $ | 0.61 | $ | 0.74 | ||||||||
Diluted | $ | 0.26 | $ | 0.31 | $ | 0.61 | $ | 0.74 | ||||||||
Cash dividends declared per common share | $ | 0.06 | $ | 0.06 | $ | 0.18 | $ | 0.18 | ||||||||
Realized gains on investments, net | ||||||||||||||||
Net realized gains on investments before credit related impairments on fixed maturity securities | $ | 1,838 | $ | 647 | $ | 5,090 | $ | 1,983 | ||||||||
Other than temporary impairment, credit losses recognized in earnings | — | — | (529 | ) | — | |||||||||||
Portion of impairment recognized in other comprehensive income | — | — | — | — | ||||||||||||
Realized gains on investments, net | $ | 1,838 | $ | 647 | $ | 4,561 | $ | 1,983 |
Employers Holdings, Inc. and Subsidiaries | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(in thousands) | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2012 | 2011 | |||||||
Operating activities | (unaudited) | |||||||
Net income | $ | 19,378 | $ | 28,379 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 4,193 | 4,861 | ||||||
Stock-based compensation | 3,942 | 2,738 | ||||||
Amortization of premium on investments, net | 5,342 | 5,791 | ||||||
Allowance for doubtful accounts | 834 | (1,396 | ) | |||||
Deferred income tax expense | (10,031 | ) | (4,756 | ) | ||||
Realized gains on investments, net | (4,561 | ) | (1,983 | ) | ||||
Realized losses on retirement of assets | 314 | 128 | ||||||
Change in operating assets and liabilities: | ||||||||
Accrued investment income | 942 | 2,770 | ||||||
Premiums receivable | (65,455 | ) | (43,331 | ) | ||||
Reinsurance recoverable for paid and unpaid losses | 29,393 | 32,167 | ||||||
Funds held by or deposited with reinsureds | (1,575 | ) | 2,086 | |||||
Federal income taxes recoverable | 2,054 | (4,212 | ) | |||||
Unpaid losses and loss adjustment expenses | 32,061 | (30,465 | ) | |||||
Unearned premiums | 75,910 | 44,733 | ||||||
Accounts payable, accrued expenses and other liabilities | 1,604 | 9,979 | ||||||
Deferred reinsurance gain – LPT Agreement | (11,630 | ) | (12,984 | ) | ||||
Other | 8,167 | 1,472 | ||||||
Net cash provided by operating activities | 90,882 | 35,977 | ||||||
Investing activities | ||||||||
Purchase of fixed maturities | (270,549 | ) | (112,895 | ) | ||||
Purchase of equity securities | (28,804 | ) | (4,314 | ) | ||||
Proceeds from sale of fixed maturities | 112,704 | 98,400 | ||||||
Proceeds from sale of equity securities | 14,002 | 4,490 | ||||||
Proceeds from maturities and redemptions of investments | 124,198 | 104,990 | ||||||
Proceeds from sale of fixed assets | 107 | — | ||||||
Capital expenditures and other | (5,177 | ) | (3,591 | ) | ||||
Restricted cash and cash equivalents provided by investing activities | 837 | 10,757 | ||||||
Net cash (used in) provided by investing activities | (52,682 | ) | 97,837 | |||||
Financing activities | ||||||||
Acquisition of treasury stock | (41,385 | ) | (40,720 | ) | ||||
Cash transactions related to stock-based compensation | (209 | ) | 800 | |||||
Dividends paid to stockholders | (5,664 | ) | (6,885 | ) | ||||
Net cash used in financing activities | (47,258 | ) | (46,805 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (9,058 | ) | 87,009 | |||||
Cash and cash equivalents at the beginning of the period | 252,300 | 119,825 | ||||||
Cash and cash equivalents at the end of the period | $ | 243,242 | $ | 206,834 |
September 30, 2012 | December 31, 2011 | |||||||||||||||
Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Financial assets | ||||||||||||||||
Investments | $ | 2,033,748 | $ | 2,033,748 | $ | 1,950,745 | $ | 1,950,745 | ||||||||
Cash and cash equivalents | 243,242 | 243,242 | 252,300 | 252,300 | ||||||||||||
Restricted cash and cash equivalents | 5,462 | 5,462 | 6,299 | 6,299 | ||||||||||||
Financial liabilities | ||||||||||||||||
Notes payable | 122,000 | 127,479 | 122,000 | 130,447 |
• | Level 1 - Inputs are unadjusted quoted market prices for identical assets or liabilities in active markets at the measurement date. |
• | Level 2 - Inputs other than Level 1 prices that are observable for similar assets or liabilities through corroboration with market data at the measurement date. |
• | Level 3 - Inputs that are unobservable that reflect management's best estimate of what market participants would use in pricing the assets or liabilities at the measurement date. |
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||||
U.S. Treasuries | $ | — | $ | 147,297 | $ | — | $ | — | $ | 137,365 | $ | — | ||||||||||||
U.S. Agencies | — | 94,560 | — | — | 108,448 | — | ||||||||||||||||||
States and municipalities | — | 773,194 | — | — | 789,636 | — | ||||||||||||||||||
Corporate securities | — | 583,799 | — | — | 501,669 | — | ||||||||||||||||||
Residential mortgage-backed securities | — | 254,477 | — | — | 281,511 | — | ||||||||||||||||||
Commercial mortgage-backed securities | — | 38,466 | — | — | 21,665 | — | ||||||||||||||||||
Asset-backed securities | — | 13,797 | — | — | 12,405 | — | ||||||||||||||||||
Total fixed maturity securities | — | 1,905,590 | — | — | 1,852,699 | — | ||||||||||||||||||
Equity securities | $ | 128,158 | $ | — | $ | — | $ | 98,046 | $ | — | $ | — |
Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
At September 30, 2012 | ||||||||||||||||
Fixed maturity securities | ||||||||||||||||
U.S. Treasuries | $ | 132,747 | $ | 14,550 | $ | — | $ | 147,297 | ||||||||
U.S. Agencies | 88,259 | 6,301 | — | 94,560 | ||||||||||||
States and municipalities | 700,029 | 73,165 | — | 773,194 | ||||||||||||
Corporate securities | 531,578 | 52,252 | (31 | ) | 583,799 | |||||||||||
Residential mortgage-backed securities | 234,856 | 19,731 | (110 | ) | 254,477 | |||||||||||
Commercial mortgage-backed securities | 36,952 | 1,514 | — | 38,466 | ||||||||||||
Asset-backed securities | 13,528 | 270 | (1 | ) | 13,797 | |||||||||||
Total fixed maturity securities | 1,737,949 | 167,783 | (142 | ) | 1,905,590 | |||||||||||
Equity securities | 80,897 | 48,232 | (971 | ) | 128,158 | |||||||||||
Total investments | $ | 1,818,846 | $ | 216,015 | $ | (1,113 | ) | $ | 2,033,748 |
At December 31, 2011 | ||||||||||||||||
Fixed maturity securities | ||||||||||||||||
U.S. Treasuries | $ | 122,144 | $ | 15,222 | $ | (1 | ) | $ | 137,365 | |||||||
U.S. Agencies | 101,520 | 6,942 | (14 | ) | 108,448 | |||||||||||
States and municipalities | 719,431 | 70,391 | (186 | ) | 789,636 | |||||||||||
Corporate securities | 467,470 | 35,745 | (1,546 | ) | 501,669 | |||||||||||
Residential mortgage-backed securities | 262,961 | 19,154 | (604 | ) | 281,511 | |||||||||||
Commercial mortgage-backed securities | 20,756 | 910 | (1 | ) | 21,665 | |||||||||||
Asset-backed securities | 11,934 | 471 | — | 12,405 | ||||||||||||
Total fixed maturity securities | 1,706,216 | 148,835 | (2,352 | ) | 1,852,699 | |||||||||||
Equity securities | 64,962 | 34,639 | (1,555 | ) | 98,046 | |||||||||||
Total investments | $ | 1,771,178 | $ | 183,474 | $ | (3,907 | ) | $ | 1,950,745 |
Amortized Cost | Estimated Fair Value | |||||||
(in thousands) | ||||||||
Due in one year or less | $ | 98,755 | $ | 100,909 | ||||
Due after one year through five years | 613,369 | 658,752 | ||||||
Due after five years through ten years | 527,068 | 598,510 | ||||||
Due after ten years | 213,421 | 240,679 | ||||||
Mortgage and asset-backed securities | 285,336 | 306,740 | ||||||
Total | $ | 1,737,949 | $ | 1,905,590 |
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||
Estimated Fair Value | Gross Unrealized Losses | Number of Issues | Estimated Fair Value | Gross Unrealized Losses | Number of Issues | |||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||
Less than 12 months: | ||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||
U.S. Treasuries | $ | — | $ | — | — | $ | 5,076 | $ | (1 | ) | 2 | |||||||||||
U.S. Agencies | — | — | — | 11,124 | (14 | ) | 3 | |||||||||||||||
States and municipalities | — | — | — | 5,094 | (185 | ) | 1 | |||||||||||||||
Corporate securities | 2,561 | (31 | ) | 1 | 64,846 | (1,481 | ) | 30 | ||||||||||||||
Residential mortgage-backed securities | 145 | (1 | ) | 11 | 4,916 | (20 | ) | 14 | ||||||||||||||
Commercial mortgage-backed securities | — | — | — | 1,464 | (1 | ) | 1 | |||||||||||||||
Asset-backed securities | 1,000 | (1 | ) | 2 | — | — | — | |||||||||||||||
Total fixed maturity securities | 3,706 | (33 | ) | 14 | 92,520 | (1,702 | ) | 51 | ||||||||||||||
Equity securities | 10,960 | (883 | ) | 37 | 12,443 | (1,462 | ) | 57 | ||||||||||||||
Total less than 12 months | $ | 14,666 | $ | (916 | ) | 51 | $ | 104,963 | $ | (3,164 | ) | 108 | ||||||||||
12 months or greater: | ||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||
States and municipalities | — | — | — | 1,049 | (1 | ) | 1 | |||||||||||||||
Corporate securities | — | — | — | 1,024 | (65 | ) | 1 | |||||||||||||||
Residential mortgage-backed securities | 2,456 | (109 | ) | 9 | 2,692 | (584 | ) | 5 | ||||||||||||||
Total fixed maturity securities | 2,456 | (109 | ) | 9 | 4,765 | (650 | ) | 7 | ||||||||||||||
Equity securities | 300 | (88 | ) | 6 | 452 | (93 | ) | 4 | ||||||||||||||
Total 12 months or greater | $ | 2,756 | $ | (197 | ) | 15 | $ | 5,217 | $ | (743 | ) | 11 | ||||||||||
Total available-for-sale: | ||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||
U.S. Treasuries | $ | — | $ | — | — | $ | 5,076 | $ | (1 | ) | 2 | |||||||||||
U.S. Agencies | — | — | — | 11,124 | (14 | ) | 3 | |||||||||||||||
States and municipalities | — | — | — | 6,143 | (186 | ) | 2 | |||||||||||||||
Corporate securities | 2,561 | (31 | ) | 1 | 65,870 | (1,546 | ) | 31 | ||||||||||||||
Residential mortgage-backed securities | 2,601 | (110 | ) | 20 | 7,608 | (604 | ) | 19 | ||||||||||||||
Commercial mortgage-backed securities | — | — | — | 1,464 | (1 | ) | 1 | |||||||||||||||
Asset-backed securities | 1,000 | (1 | ) | 2 | — | — | — | |||||||||||||||
Total fixed maturity securities | 6,162 | (142 | ) | 23 | 97,285 | (2,352 | ) | 58 | ||||||||||||||
Equity securities | 11,260 | (971 | ) | 43 | 12,895 | (1,555 | ) | 61 | ||||||||||||||
Total available-for-sale | $ | 17,422 | $ | (1,113 | ) | 66 | $ | 110,180 | $ | (3,907 | ) | 119 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Realized gains on investments, net | ||||||||||||||||
Fixed maturity securities | ||||||||||||||||
Gross gains | $ | 1,138 | $ | 185 | $ | 3,433 | $ | 1,117 | ||||||||
Gross losses | — | — | (5 | ) | (148 | ) | ||||||||||
Realized gains on fixed maturity securities, net | $ | 1,138 | $ | 185 | $ | 3,428 | $ | 969 | ||||||||
Equity securities | ||||||||||||||||
Gross gains | $ | 731 | $ | 479 | $ | 1,891 | $ | 1,034 | ||||||||
Gross losses | (31 | ) | (17 | ) | (758 | ) | (20 | ) | ||||||||
Realized gains on equity securities, net | $ | 700 | $ | 462 | $ | 1,133 | $ | 1,014 | ||||||||
Total | $ | 1,838 | $ | 647 | $ | 4,561 | $ | 1,983 | ||||||||
Change in unrealized gains (losses) | ||||||||||||||||
Fixed maturity securities | $ | 17,600 | $ | 36,444 | $ | 21,158 | $ | 55,902 | ||||||||
Equity securities | 5,246 | (11,038 | ) | 14,177 | (6,546 | ) | ||||||||||
Total | $ | 22,846 | $ | 25,406 | $ | 35,335 | $ | 49,356 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Fixed maturity securities | $ | 17,243 | $ | 19,726 | $ | 53,532 | $ | 60,665 | ||||||||
Equity securities | 856 | 449 | 2,280 | 1,367 | ||||||||||||
Cash equivalents and restricted cash | 52 | 46 | 275 | 196 | ||||||||||||
18,151 | 20,221 | 56,087 | 62,228 | |||||||||||||
Investment expenses | (645 | ) | (637 | ) | (1,899 | ) | (1,845 | ) | ||||||||
Net investment income | $ | 17,506 | $ | 19,584 | $ | 54,188 | $ | 60,383 |
Nine Months Ended | ||||||
September 30, | ||||||
2012 | 2011 | |||||
Expense computed at statutory rate | 35.0 | % | 35.0 | % | ||
Dividends received deduction and tax-exempt interest | (64.1 | ) | (47.4 | ) | ||
LPT Agreement | (38.2 | ) | (26.7 | ) | ||
Pre-privatization reserve adjustments | — | (6.6 | ) | |||
Other | (1.6 | ) | 1.2 | |||
Effective tax rate | (68.9 | )% | (44.5 | )% |
Nine Months Ended | ||||||||
September 30, | ||||||||
2012 | 2011 | |||||||
(in thousands) | ||||||||
Unpaid losses and LAE, gross of reinsurance, at beginning of period | $ | 2,272,363 | $ | 2,279,729 | ||||
Less reinsurance recoverables for unpaid losses and LAE | 940,840 | 956,043 | ||||||
Net unpaid losses and LAE at beginning of period | 1,331,523 | 1,323,686 | ||||||
Losses and LAE, net of reinsurance, related to: | ||||||||
Current period | 277,821 | 203,362 | ||||||
Prior periods | 1,281 | 631 | ||||||
Total net losses and LAE incurred during the period | 279,102 | 203,993 | ||||||
Deduct payments for losses and LAE, net of reinsurance, related to: | ||||||||
Current period | 40,991 | 33,477 | ||||||
Prior periods | 178,087 | 172,608 | ||||||
Total net payments for losses and LAE during the period | 219,078 | 206,085 | ||||||
Ending unpaid losses and LAE, net of reinsurance | 1,391,547 | 1,321,594 | ||||||
Reinsurance recoverable for unpaid losses and LAE | 912,877 | 927,670 | ||||||
Unpaid losses and LAE, gross of reinsurance, at end of period | $ | 2,304,424 | $ | 2,249,264 |
September 30, 2012 | December 31, 2011 | |||||||
(in thousands) | ||||||||
Net unrealized gain on investments, before taxes | $ | 214,902 | $ | 179,567 | ||||
Deferred tax expense on net unrealized gains | (75,216 | ) | (62,848 | ) | ||||
Total accumulated other comprehensive income, net | $ | 139,686 | $ | 116,719 |
Number Awarded | Fair Value on Date of Grant | Exercise Price | Aggregate Fair Value on Date of Grant | |||||||||||
(in millions) | ||||||||||||||
March 2012 | ||||||||||||||
Stock options(1) | 242,300 | $ | 5.64 | $ | 17.02 | $ | 1.4 | |||||||
RSUs(1) | 79,450 | 17.02 | — | 1.4 | ||||||||||
PSAs(2) | 158,900 | 17.02 | — | 2.7 | ||||||||||
May 2012 | ||||||||||||||
RSUs(1) | 36,355 | 17.40 | — | 0.6 |
(1) | The stock options and RSUs were awarded to certain officers of the Company and have a service vesting period of four years after the date awarded and vest 25% on each of the subsequent four anniversaries of the grant date. The stock options and RSUs are subject to accelerated vesting in certain circumstances, such as: death or disability, or in connection with change of control of the Company. The stock options expire seven years from the date of grant. |
(2) | The PSAs have a performance period of three years and are subject to certain performance goals, based on the Company's statutory combined ratio, with payouts that range from 0% to 200% of the target awards. |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands, except share data) | ||||||||||||||||
Net income available to stockholders—basic and diluted | $ | 8,150 | $ | 11,783 | $ | 19,378 | $ | 28,379 | ||||||||
Weighted average number of shares outstanding—basic | 30,891,648 | 37,623,935 | 31,689,844 | 38,251,561 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
PSAs | 43,241 | — | 20,562 | — | ||||||||||||
Stock options | 114,390 | — | 99,782 | 61,055 | ||||||||||||
RSUs | 46,827 | 12,577 | 60,183 | 67,751 | ||||||||||||
Dilutive potential shares | 204,458 | 12,577 | 180,527 | 128,806 | ||||||||||||
Weighted average number of shares outstanding—diluted | 31,096,106 | 37,636,512 | 31,870,371 | 38,380,367 |
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Options excluded as the exercise price was greater than the average market price | 934,597 | 1,449,821 | 934,597 | 1,122,986 | ||||||||
Options and RSUs excluded under the treasury method, as the potential proceeds on settlement or exercise price was greater than the value of shares acquired | 242,300 | 659,729 | 554,484 | 479,723 |
• | Gross premiums written increased 41% and 40%; |
• | Net premiums earned increased 42% and 37%; |
• | Losses and LAE increased 46% and 40%; |
• | Underwriting and other operating expenses increased 16% and 18%; and |
• | Income tax benefit decreased to $1.2 million and $7.9 million during the three and nine months ended September 30, 2012, respectively, compared to $4.4 million and $8.7 million for the corresponding periods of 2011. |
September 30, 2012 | December 31, 2011 | |||||||
(in thousands, expect share data) | ||||||||
Stockholders' equity including the Deferred Gain(1) | $ | 814,780 | $ | 827,380 | ||||
GAAP stockholders' equity | $ | 473,216 | $ | 474,186 | ||||
Common shares outstanding | 30,724,086 | 32,996,809 |
(1) | Stockholders' equity, including the Deferred Gain, is a non-GAAP measure that is defined as total stockholders' equity plus the Deferred Gain, which we believe is an important supplemental measure of our capital position. |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Gross premiums written | $ | 147,032 | $ | 104,514 | $ | 442,920 | $ | 315,571 | ||||||||
Net premiums written | $ | 144,353 | $ | 102,557 | 435,081 | 309,249 | ||||||||||
Net premiums earned | $ | 131,766 | $ | 92,601 | $ | 360,621 | $ | 263,156 | ||||||||
Net investment income | 17,506 | 19,584 | 54,188 | 60,383 | ||||||||||||
Realized gains on investments, net | 1,838 | 647 | 4,561 | 1,983 | ||||||||||||
Other income | 30 | 82 | 225 | 205 | ||||||||||||
Total revenues | 151,140 | 112,914 | 419,595 | 325,727 | ||||||||||||
Losses and LAE | 98,255 | 67,438 | 267,471 | 191,009 | ||||||||||||
Commission expense | 14,865 | 10,968 | 44,541 | 32,368 | ||||||||||||
Policyholder dividends | 867 | 840 | 2,517 | 2,766 | ||||||||||||
Underwriting and other operating expenses | 29,280 | 25,334 | 90,935 | 77,212 | ||||||||||||
Interest expense | 896 | 906 | 2,656 | 2,731 | ||||||||||||
Income tax benefit | (1,173 | ) | (4,355 | ) | (7,903 | ) | (8,738 | ) | ||||||||
Total expenses | 142,990 | 101,131 | 400,217 | 297,348 | ||||||||||||
Net income | $ | 8,150 | $ | 11,783 | $ | 19,378 | $ | 28,379 | ||||||||
Less impact of the Deferred Gain | $ | 3,646 | $ | 4,203 | $ | 11,630 | $ | 12,984 | ||||||||
Net income before impact of the Deferred Gain(1) | $ | 4,504 | $ | 7,580 | $ | 7,748 | $ | 15,395 |
(1) | We define net income before impact of the Deferred Gain as net income less: (a) amortization of Deferred Gain and (b) adjustments to LPT Agreement ceded reserves. Deferred Gain reflects the unamortized gain from our LPT Agreement. Under GAAP, this gain is deferred and is being amortized using the recovery method, whereby the amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries, and the amortization is reflected in losses and LAE. We periodically reevaluate the remaining direct reserves subject to the LPT Agreement. Our reevaluation results in corresponding adjustments, if needed, to reserves, ceded reserves, reinsurance recoverables, and the Deferred Gain, with the net effect being an increase or decrease, as the case may be, to net income. Net income before impact of the Deferred Gain is not a measurement of financial performance under GAAP, but rather reflects the difference in accounting treatment between statutory and GAAP, and should not be considered in isolation or as an alternative to net income before income taxes, net income, or any other measure of performance derived in accordance with GAAP. |
As of September 30, 2012 | |||||
Year-to-Date Increase | Year-Over-Year Increase | ||||
In-force premiums | 29.7 | % | 38.6 | % | |
In-force policy count | 25.7 | 34.7 | |||
Average in-force policy size | 3.2 | 2.9 | |||
In-force payroll exposure | 21.9 | 29.1 | |||
Net rate(1) | 6.4 | 7.4 |
(1) | 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. |
September 30, 2012 | December 31, 2011 | September 30, 2011 | December 31, 2010 | |||||||||||||||||||||||||
State | Premiums In-force | Policies In-force | Premiums In-force | Policies In-force | Premiums In-force | Policies In-force | Premiums In-force | Policies In-force | ||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
California | $ | 299,272 | 44,766 | $ | 221,910 | 36,867 | $ | 206,272 | 35,139 | $ | 172,621 | 29,244 | ||||||||||||||||
Illinois | 29,291 | 3,235 | 24,744 | 2,433 | 23,041 | 2,045 | 18,617 | 932 | ||||||||||||||||||||
Georgia | 21,971 | 2,915 | 16,393 | 2,050 | 14,530 | 1,716 | 10,772 | 757 | ||||||||||||||||||||
Florida | 17,332 | 2,805 | 15,226 | 2,399 | 14,993 | 2,309 | 15,071 | 1,963 | ||||||||||||||||||||
Nevada | 15,281 | 3,890 | 14,639 | 3,718 | 14,675 | 3,630 | 16,940 | 3,596 | ||||||||||||||||||||
Other | 127,683 | 18,653 | 101,009 | 13,226 | 95,080 | 11,762 | 87,116 | 8,069 | ||||||||||||||||||||
Total | $ | 510,830 | 76,264 | $ | 393,921 | 60,693 | $ | 368,591 | 56,601 | $ | 321,137 | 44,561 |
Effective Date | Premium Rate Change Filed in California | ||
February 1, 2009 | 10.0 | % | |
August 15, 2009 | 10.5 | ||
March 15, 2010 | 3.0 | ||
March 15, 2011 | 2.5 | ||
September 15, 2011 | 3.9 | ||
June 15, 2012 | 6.0 |
• | overall rate increases; |
• | increasing policy count as we continue to execute our strategy; |
• | increasing average policy size; and |
• | lessened competitive pressures. |
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Loss and LAE ratio | 74.6 | % | 72.8 | % | 74.2 | % | 72.6 | % | ||||
Underwriting and other operating expenses ratio | 22.2 | 27.4 | 25.2 | 29.3 | ||||||||
Commission expense ratio | 11.3 | 11.8 | 12.3 | 12.3 | ||||||||
Policyholder dividends ratio | 0.6 | 0.9 | 0.7 | 1.1 | ||||||||
Combined ratio | 108.7 | % | 112.9 | % | 112.4 | % | 115.3 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Prior accident year loss development, net | $ | (0.2 | ) | $ | (0.2 | ) | $ | (1.3 | ) | $ | (0.6 | ) | ||||
LPT amortization of the deferred reinsurance gain | $ | 3.6 | $ | 4.2 | $ | 11.6 | $ | 13.0 |
September 30, | ||||||||
2012 | 2011 | |||||||
(in thousands) | ||||||||
Cash and cash equivalents provided by (used in): | ||||||||
Operating activities | $ | 90,882 | $ | 35,977 | ||||
Investing activities | (52,682 | ) | 97,837 | |||||
Financing activities | (47,258 | ) | (46,805 | ) | ||||
(Decrease) increase in cash and cash equivalents | $ | (9,058 | ) | $ | 87,009 |
Category | Estimated Fair Value | Percentage of Total | Yield | |||||||
(in thousands, except percentages) | ||||||||||
U.S. Treasuries | $ | 147,297 | 7.2 | % | 2.5 | % | ||||
U.S. Agencies | 94,560 | 4.7 | 3.2 | |||||||
States and municipalities | 773,194 | 38.0 | 5.8 | |||||||
Corporate securities | 583,799 | 28.7 | 4.2 | |||||||
Residential mortgage-backed securities | 254,477 | 12.5 | 4.5 | |||||||
Commercial mortgage-backed securities | 38,466 | 1.9 | 3.5 | |||||||
Asset-backed securities | 13,797 | 0.7 | 2.4 | |||||||
Equity securities | 128,158 | 6.3 | 5.3 | |||||||
Total | $ | 2,033,748 | 100.0 | % | ||||||
Weighted average yield | 4.7 | % |
Rating | Percentage of Total Estimated Fair Value | ||
“AAA” | 9.7 | % | |
“AA” | 56.3 | ||
“A” | 22.0 | ||
“BBB” | 11.9 | ||
Below investment grade | 0.1 | ||
Total | 100.0 | % |
Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
At September 30, 2012 | (in thousands) | |||||||||||||||
Fixed maturity securities | ||||||||||||||||
U.S. Treasuries | $ | 132,747 | $ | 14,550 | $ | — | $ | 147,297 | ||||||||
U.S. Agencies | 88,259 | 6,301 | — | 94,560 | ||||||||||||
States and municipalities | 700,029 | 73,165 | — | 773,194 | ||||||||||||
Corporate securities | 531,578 | 52,252 | (31 | ) | 583,799 | |||||||||||
Residential mortgaged-backed securities | 234,856 | 19,731 | (110 | ) | 254,477 | |||||||||||
Commercial mortgaged-backed securities | 36,952 | 1,514 | — | 38,466 | ||||||||||||
Asset-backed securities | 13,528 | 270 | (1 | ) | 13,797 | |||||||||||
Total fixed maturity securities | 1,737,949 | 167,783 | (142 | ) | 1,905,590 | |||||||||||
Equity securities | 80,897 | 48,232 | (971 | ) | 128,158 | |||||||||||
Total investments | $ | 1,818,846 | $ | 216,015 | $ | (1,113 | ) | $ | 2,033,748 |
Payment Due By Period | ||||||||||||||||||||
Total | Less Than 1-Year | 1-3 Years | 4-5 Years | More Than 5-Years | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Operating leases | $ | 25,559 | $ | 1,742 | $ | 13,345 | $ | 8,007 | $ | 2,465 | ||||||||||
Purchased liabilities | 117 | 117 | — | — | — | |||||||||||||||
Notes payable(1) | 156,461 | 10,705 | 25,172 | 63,836 | 56,748 | |||||||||||||||
Capital leases | 2,129 | 316 | 902 | 799 | 112 | |||||||||||||||
Losses and LAE reserves (2)(3) | 2,304,424 | 272,807 | 337,167 | 220,969 | 1,473,481 | |||||||||||||||
Total contractual obligations | $ | 2,488,690 | $ | 285,687 | $ | 376,586 | $ | 293,611 | $ | 1,532,806 |
(1) | Notes payable obligations reflect payments for the principal and estimated interest expense based on LIBOR rates plus a margin. The estimated interest expense was based on the contractual obligations of the debt outstanding as of September 30, 2012. The interest rates range from 1.5% to 4.7%. |
(2) | Estimated losses and LAE reserve payment patterns have been computed based on historical information. Our calculation of loss and LAE reserve payments by period is subject to the same uncertainties associated with determining the level of reserves and to the additional uncertainties arising from the difficulty of predicting when claims (including claims that have not yet been reported to us) will be paid. Actual payments of losses and LAE by period will vary, perhaps materially, from the above table to the extent that current estimates of losses and LAE reserves vary from actual ultimate claims amounts due to variations between expected and actual payout patterns. |
(3) | The losses and LAE reserves are presented gross of reinsurance recoverables for unpaid losses, which are as follows for each of the periods presented above: |
Recoveries By Period | ||||||||||||||||||||
Total | Less Than 1-Year | 1-3 Years | 4-5 Years | More Than 5-Years | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Reinsurance recoverables | $ | 912,877 | $ | 44,506 | $ | 86,992 | $ | 83,725 | $ | 697,654 |
Period | Total Number of Shares Purchased | Average Price Paid Per Share(1) | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program(2) | ||||||||||
(in millions) | ||||||||||||||
July 1 – July 31, 2012 | 136,137 | $ | 17.81 | 136,137 | $ | 53.2 | ||||||||
August 1 – August 31, 2012 | 92,427 | 17.73 | 92,427 | 51.6 | ||||||||||
September 1 – September 30, 2012 | — | — | — | 51.6 | ||||||||||
Total | 228,564 | $ | 17.77 | 228,564 |
(1) | Includes fees and commissions paid on stock repurchases. |
(2) | On November 3, 2010, the Board of Directors authorized a share repurchase program for repurchases of up to $100 million of the Company's common stock (the 2011 Program). On November 2, 2011, the Board of Directors authorized a $100 million expansion of the 2011 Program, to $200 million. We expect that shares may be purchased at prevailing market prices through June 30, 2013 through a variety of methods, including open market or private transactions, in accordance with applicable laws and regulations and as determined by management. |
Incorporated by Reference Herein | ||||||||||
Exhibit No. | Description of Exhibit | Included Herewith | Form | Exhibit | Filing Date | |||||
31.1 | Certification of Douglas D. Dirks Pursuant to Section 302 | X | ||||||||
31.2 | Certification of William E. Yocke Pursuant to Section 302 | X | ||||||||
32.1 | Certification of Douglas D. Dirks Pursuant to Section 906 | X | ||||||||
32.2 | Certification of William E. Yocke Pursuant to Section 906 | X | ||||||||
*101.INS | XBRL Instance Document | X | ||||||||
*101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||||
*101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||
*101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||
*101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||
*101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X |
Date: | November 8, 2012 | /s/ Douglas D. Dirks |
Douglas D. Dirks | ||
President and Chief Executive Officer | ||
Employers Holdings, Inc. |
Date: | November 8, 2012 | /s/ William E. Yocke |
William E. Yocke | ||
Executive Vice President and Chief Financial Officer | ||
Employers Holdings, Inc. | ||
(Principal Financial and Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Employers Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 8, 2012 | /s/ Douglas D. Dirks |
Douglas D. Dirks | ||
President and Chief Executive Officer | ||
Employers Holdings, Inc. |
1. | I have reviewed this quarterly report on Form 10-Q of Employers Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | November 8, 2012 | /s/ William E. Yocke |
William E. Yocke | ||
Executive Vice President and Chief Financial Officer | ||
Employers Holdings, Inc. | ||
(Principal Financial and Accounting Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 8, 2012 | /s/ Douglas D. Dirks |
Douglas D. Dirks | ||
President and Chief Executive Officer | ||
Employers Holdings, Inc. |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | November 8, 2012 | /s/ William E. Yocke |
William E. Yocke | ||
Executive Vice President and Chief Financial Officer | ||
Employers Holdings, Inc. | ||
(Principal Financial and Accounting Officer) |
Fair Value of Financial Instruments, Fair Value Inputs (Details) (USD $)
In Thousands, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | $ 2,033,748 | $ 1,950,745 |
Debt Securities [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 1,905,590 | 1,852,699 |
Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 1,905,590 | 1,852,699 |
Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
US Treasury Securities [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 147,297 | 137,365 |
US Treasury Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
US Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 137,365 | |
US Treasury Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
US Government Agencies Debt Securities [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 94,560 | 108,448 |
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 108,448 | |
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
US States and Political Subdivisions Debt Securities [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 773,194 | 789,636 |
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 789,636 | |
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Corporate Debt Securities [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 583,799 | 501,669 |
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 501,669 | |
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Residential Mortgage Backed Securities [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 254,477 | 281,511 |
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 281,511 | |
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Commercial Mortgage Backed Securities [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 38,466 | 21,665 |
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 21,665 | |
Commercial Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Asset-backed Securities [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 13,797 | 12,405 |
Asset-backed Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Asset-backed Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 12,405 | |
Asset-backed Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Equity Securities [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 128,158 | 98,046 |
Equity Securities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 98,046 | |
Equity Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Equity Securities [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | $ 0 | $ 0 |
Basis of Presentation DEI (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Change in Accounting Estimate [Line Items] | ||||
Underwriting and other operating expenses | $ 29,280 | $ 25,334 | $ 90,935 | $ 77,212 |
Income tax (benefit) | (1,173) | (4,355) | (7,903) | (8,738) |
Net income | 8,150 | 11,783 | 19,378 | 28,379 |
Change in Accounting Method Accounted for as Change in Estimate [Member]
|
||||
Change in Accounting Estimate [Line Items] | ||||
Underwriting and other operating expenses | 1,400 | 1,400 | ||
Income tax (benefit) | 200 | 200 | ||
Net income | $ 1,200 | $ 1,200 | ||
Earnings per share, basic and diluted | $ 0.04 | $ 0.04 |
Accumulated Other Comprehensive Income (Details) (USD $)
In Thousands, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Net unrealized gain on investments, before taxes | $ 214,902 | $ 179,567 |
Deferred tax expense on net unrealized gains | (75,216) | (62,848) |
Total accumulated other comprehensive income, net | $ 139,686 | $ 116,719 |
Investments
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9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments The cost or amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the Company’s investments were as follows:
The amortized cost and estimated fair value of fixed maturity securities at September 30, 2012, by contractual maturity, are shown below. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
The following is a summary of investments that have been in a continuous unrealized loss position for less than 12 months and for 12 months or greater as of September 30, 2012 and December 31, 2011.
Based on reviews of the fixed maturity securities, the Company determined that unrealized losses as of September 30, 2012 were primarily the result of changes in prevailing interest rates and not the credit quality of the issuers. The fixed maturity securities whose total fair value was less than amortized cost were not determined to be other-than-temporarily impaired given the severity and duration of the impairment, the credit quality of the issuers, the Company’s intent to not sell the securities, and a determination that it is not more likely than not that the Company will be required to sell the securities until fair value recovers to above cost, or to maturity. Based on reviews of the equity securities as of September 30, 2012, the Company recognized total impairments of $0.5 million in the fair values of seven equity securities as a result of the severity and duration of the change in fair values of those securities. Realized gains on investments, net and the change in unrealized gains (losses) on fixed maturity and equity securities are determined on a specific-identification basis and were as follows:
Net investment income was as follows:
The Company is required by various state laws and regulations to keep securities or letters of credit in depository accounts with certain states in which it does business. As of September 30, 2012 and December 31, 2011, securities having a fair value of $532.7 million and $522.6 million, respectively, were on deposit. These laws and regulations govern not only the amount, but also the types of securities that are eligible for deposit. The deposits are limited to fixed maturity securities in all states. Additionally, certain reinsurance contracts require Company funds to be held in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities assumed by the Company. The fair value of fixed maturity securities held in trust for the benefit of ceding reinsurers at September 30, 2012 and December 31, 2011 was $33.2 million and $40.3 million, respectively. Pursuant to the Amended Credit Facility, a portion of the Company's debt was secured by fixed maturity securities and restricted cash and cash equivalents that had a fair value of $115.9 million and $126.7 million at September 30, 2012 and December 31, 2011, respectively. |