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 | July 21, 2016 | |
Common Stock, $0.01 par value per share | 32,438,110 shares outstanding |
Page No. | ||
Employers Holdings, Inc. and Subsidiaries | ||||||||
Consolidated Balance Sheets | ||||||||
(in thousands, except share data) | ||||||||
As of | As of | |||||||
June 30, 2016 | December 31, 2015 | |||||||
Assets | (unaudited) | |||||||
Available for sale: | ||||||||
Fixed maturity securities at fair value (amortized cost $2,205,500 at June 30, 2016 and $2,221,100 at December 31, 2015) | $ | 2,326,500 | $ | 2,288,500 | ||||
Equity securities at fair value (cost $113,400 at June 30, 2016 and $137,500 at December 31, 2015) | 181,400 | 198,700 | ||||||
Short-term investments at fair value (amortized cost $2,000 at June 30, 2016) | 2,000 | — | ||||||
Total investments | 2,509,900 | 2,487,200 | ||||||
Cash and cash equivalents | 128,200 | 56,600 | ||||||
Restricted cash and cash equivalents | 2,400 | 2,500 | ||||||
Accrued investment income | 20,600 | 20,600 | ||||||
Premiums receivable (less bad debt allowance of $9,900 at June 30, 2016 and $12,200 at December 31, 2015) | 330,400 | 301,100 | ||||||
Reinsurance recoverable for: | ||||||||
Paid losses | 7,300 | 7,700 | ||||||
Unpaid losses | 598,800 | 628,200 | ||||||
Deferred policy acquisition costs | 48,400 | 44,300 | ||||||
Deferred income taxes, net | 41,100 | 67,900 | ||||||
Property and equipment, net | 23,100 | 24,900 | ||||||
Intangible assets, net | 8,400 | 8,500 | ||||||
Goodwill | 36,200 | 36,200 | ||||||
Contingent commission receivable—LPT Agreement | 31,100 | 29,200 | ||||||
Other assets | 46,500 | 40,900 | ||||||
Total assets | $ | 3,832,400 | $ | 3,755,800 | ||||
Liabilities and stockholders’ equity | ||||||||
Claims and policy liabilities: | ||||||||
Unpaid losses and loss adjustment expenses | $ | 2,332,300 | $ | 2,347,500 | ||||
Unearned premiums | 336,100 | 308,900 | ||||||
Total claims and policy liabilities | 2,668,400 | 2,656,400 | ||||||
Commissions and premium taxes payable | 50,700 | 52,500 | ||||||
Accounts payable and accrued expenses | 16,900 | 24,100 | ||||||
Deferred reinsurance gain—LPT Agreement | 180,700 | 189,500 | ||||||
Notes payable | 32,000 | 32,000 | ||||||
Other liabilities | 38,400 | 40,500 | ||||||
Total liabilities | $ | 2,987,100 | $ | 2,995,000 | ||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.01 par value; 150,000,000 shares authorized; 56,078,919 and 55,589,454 shares issued and 32,463,660 and 32,216,480 shares outstanding at June 30, 2016 and December 31, 2015, respectively | $ | 600 | $ | 600 | ||||
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued | — | — | ||||||
Additional paid-in capital | 367,900 | 357,200 | ||||||
Retained earnings | 723,500 | 682,000 | ||||||
Accumulated other comprehensive income, net | 122,800 | 83,600 | ||||||
Treasury stock, at cost (23,615,259 shares at June 30, 2016 and 23,372,974 shares at December 31, 2015) | (369,500 | ) | (362,600 | ) | ||||
Total stockholders’ equity | 845,300 | 760,800 | ||||||
Total liabilities and stockholders’ equity | $ | 3,832,400 | $ | 3,755,800 |
Employers Holdings, Inc. and Subsidiaries | ||||||||||||||||
Consolidated Statements of Comprehensive Income | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues | (unaudited) | (unaudited) | ||||||||||||||
Net premiums earned | $ | 176,900 | $ | 170,600 | $ | 349,500 | $ | 329,600 | ||||||||
Net investment income | 18,400 | 18,400 | 36,200 | 35,300 | ||||||||||||
Net realized gains on investments | 6,000 | 1,900 | 7,500 | 3,100 | ||||||||||||
Other income | 500 | — | 600 | 100 | ||||||||||||
Total revenues | 201,800 | 190,900 | 393,800 | 368,100 | ||||||||||||
Expenses | ||||||||||||||||
Losses and loss adjustment expenses | 111,700 | 101,500 | 219,000 | 207,700 | ||||||||||||
Commission expense | 21,900 | 22,900 | 42,200 | 41,600 | ||||||||||||
Underwriting and other operating expenses | 33,600 | 32,500 | 69,900 | 66,000 | ||||||||||||
Interest expense | 400 | 700 | 800 | 1,400 | ||||||||||||
Total expenses | 167,600 | 157,600 | 331,900 | 316,700 | ||||||||||||
Net income before income taxes | 34,200 | 33,300 | 61,900 | 51,400 | ||||||||||||
Income tax expense | 7,900 | 4,100 | 14,600 | 8,200 | ||||||||||||
Net income | $ | 26,300 | $ | 29,200 | $ | 47,300 | $ | 43,200 | ||||||||
Comprehensive income | ||||||||||||||||
Unrealized gains (losses) during the period (net of tax expense of $12,600 and $(13,300) for the three months ended June 30, 2016 and 2015, respectively, and $23,800 and $(8,300) for the six months ended June 30, 2016 and 2015, respectively) | $ | 23,300 | $ | (24,600 | ) | $ | 44,100 | $ | (15,400 | ) | ||||||
Reclassification adjustment for realized gains in net income (net of taxes of $2,100 and $700 for the three months ended June 30, 2016 and 2015, respectively, and $2,600 and $1,100 for the six months ended June 30, 2016 and 2015, respectively) | (3,900 | ) | (1,200 | ) | (4,900 | ) | (2,000 | ) | ||||||||
Other comprehensive income (loss), net of tax | 19,400 | (25,800 | ) | 39,200 | (17,400 | ) | ||||||||||
Total comprehensive income | $ | 45,700 | $ | 3,400 | $ | 86,500 | $ | 25,800 | ||||||||
Net realized gains on investments | ||||||||||||||||
Net realized gains on investments before credit related impairments | $ | 6,000 | $ | 2,000 | $ | 12,800 | $ | 3,200 | ||||||||
Other than temporary impairment recognized in earnings | — | (100 | ) | (5,300 | ) | (100 | ) | |||||||||
Net realized gains on investments | $ | 6,000 | $ | 1,900 | $ | 7,500 | $ | 3,100 | ||||||||
Earnings per common share (Note 11): | ||||||||||||||||
Basic | $ | 0.81 | $ | 0.91 | $ | 1.45 | $ | 1.35 | ||||||||
Diluted | $ | 0.80 | $ | 0.90 | $ | 1.44 | $ | 1.33 | ||||||||
Cash dividends declared per common share | $ | 0.09 | $ | 0.06 | $ | 0.18 | $ | 0.12 |
Employers Holdings, Inc. and Subsidiaries | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(in thousands) | ||||||||
Six Months Ended | ||||||||
June 30, | ||||||||
2016 | 2015 | |||||||
Operating activities | (unaudited) | |||||||
Net income | $ | 47,300 | $ | 43,200 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 4,300 | 3,600 | ||||||
Stock-based compensation | 3,200 | 2,700 | ||||||
Amortization of premium on investments, net | 7,400 | 6,100 | ||||||
Allowance for doubtful accounts | (2,300 | ) | 2,400 | |||||
Deferred income tax expense | 5,600 | 3,700 | ||||||
Realized gains on investments, net | (7,500 | ) | (3,100 | ) | ||||
Excess tax benefits from stock-based compensation | (1,300 | ) | (700 | ) | ||||
Other | — | 100 | ||||||
Change in operating assets and liabilities: | ||||||||
Premiums receivable | (27,000 | ) | (21,200 | ) | ||||
Reinsurance recoverable for paid and unpaid losses | 29,800 | 31,800 | ||||||
Federal income taxes | 1,500 | — | ||||||
Unpaid losses and loss adjustment expenses | (15,200 | ) | (15,200 | ) | ||||
Unearned premiums | 27,200 | 30,600 | ||||||
Accounts payable, accrued expenses and other liabilities | (9,200 | ) | 8,300 | |||||
Deferred reinsurance gain—LPT Agreement | (8,800 | ) | (11,900 | ) | ||||
Contingent commission receivable—LPT Agreement | (1,900 | ) | (2,800 | ) | ||||
Other | (11,700 | ) | (14,900 | ) | ||||
Net cash provided by operating activities | 41,400 | 62,700 | ||||||
Investing activities | ||||||||
Purchase of fixed maturity securities | (196,400 | ) | (256,600 | ) | ||||
Purchase of equity securities | (34,900 | ) | (65,700 | ) | ||||
Proceeds from sale of fixed maturity securities | 111,700 | 50,700 | ||||||
Proceeds from sale of equity securities | 65,600 | 16,300 | ||||||
Proceeds from maturities and redemptions of investments | 91,900 | 156,300 | ||||||
Capital expenditures | (2,400 | ) | (5,600 | ) | ||||
Change in restricted cash and cash equivalents | 100 | 4,200 | ||||||
Net cash provided by (used in) investing activities | 35,600 | (100,400 | ) | |||||
Financing activities | ||||||||
Acquisition of treasury stock | (6,900 | ) | — | |||||
Cash transactions related to stock-based compensation | 6,200 | 2,400 | ||||||
Dividends paid to stockholders | (5,900 | ) | (3,800 | ) | ||||
Payments on notes payable and capital leases | (100 | ) | (300 | ) | ||||
Excess tax benefits from stock-based compensation | 1,300 | 700 | ||||||
Net cash used in financing activities | (5,400 | ) | (1,000 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 71,600 | (38,700 | ) | |||||
Cash and cash equivalents at the beginning of the period | 56,600 | 103,600 | ||||||
Cash and cash equivalents at the end of the period | $ | 128,200 | $ | 64,900 |
Three Months Ended | Six Months Ended | |||||||
June 30, 2016 | June 30, 2016 | |||||||
(in millions, except per share data) | ||||||||
Change in estimated reserves ceded under the LPT Agreement | $ | (5.0 | ) | $ | (5.0 | ) | ||
Cumulative adjustment to the Deferred Gain(1) | (3.1 | ) | (3.1 | ) | ||||
Net income impact of change in estimate | 3.1 | 3.1 | ||||||
EPS impact of change in estimate | ||||||||
Basic | 0.10 | 0.10 | ||||||
Diluted | 0.09 | 0.09 |
(1) | The cumulative adjustment to the Deferred reinsurance gain–LPT Agreement (Deferred Gain) was also recognized in losses and LAE incurred in the Consolidated Statement of Comprehensive Income, so that the Deferred Gain reflects the balance that would have existed had the revised reserves been recognized at the inception of the LPT Agreement. |
Three Months Ended | Six Months Ended | |||||||
June 30, 2016 | June 30, 2016 | |||||||
(in millions, except per share data) | ||||||||
Change in estimate of contingent commission receivable – LPT Agreement | $ | 1.9 | $ | 1.9 | ||||
Cumulative adjustment to the Deferred Gain(1) | (1.8 | ) | (1.8 | ) | ||||
Net income impact of change in estimate | 1.8 | 1.8 | ||||||
EPS impact of change in estimate | ||||||||
Basic | 0.06 | 0.06 | ||||||
Diluted | 0.05 | 0.05 |
(1) | The cumulative adjustment to the Deferred Gain was also recognized in losses and LAE incurred in the Consolidated Statement of Comprehensive Income, so that the Deferred Gain reflects the balance that would have existed had the revised reserves been recognized at the inception of the LPT Agreement. |
June 30, 2016 | December 31, 2015 | |||||||||||||||
Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||
(in millions) | ||||||||||||||||
Financial assets | ||||||||||||||||
Investments | $ | 2,509.9 | $ | 2,509.9 | $ | 2,487.2 | $ | 2,487.2 | ||||||||
Cash and cash equivalents | 128.2 | 128.2 | 56.6 | 56.6 | ||||||||||||
Restricted cash and cash equivalents | 2.4 | 2.4 | 2.5 | 2.5 | ||||||||||||
Financial liabilities | ||||||||||||||||
Notes payable | $ | 32.0 | $ | 34.3 | $ | 32.0 | $ | 36.6 |
• | 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 willing market participants would use in pricing the assets or liabilities at the measurement date. |
June 30, 2016 | December 31, 2015 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||||
U.S. Treasuries | $ | — | $ | 125.9 | $ | — | $ | — | $ | 120.2 | $ | — | ||||||||||||
U.S. Agencies | — | 23.3 | — | — | 24.4 | — | ||||||||||||||||||
States and municipalities | — | 871.1 | — | — | 854.5 | — | ||||||||||||||||||
Corporate securities | — | 958.8 | — | — | 925.3 | — | ||||||||||||||||||
Residential mortgage-backed securities | — | 243.0 | — | — | 237.9 | — | ||||||||||||||||||
Commercial mortgage-backed securities | — | 75.8 | — | — | 80.3 | — | ||||||||||||||||||
Asset-backed securities | — | 28.6 | — | — | 45.9 | — | ||||||||||||||||||
Total fixed maturity securities | $ | — | $ | 2,326.5 | $ | — | $ | — | $ | 2,288.5 | $ | — | ||||||||||||
Equity securities | ||||||||||||||||||||||||
Corporate equity securities | $ | 176.5 | $ | — | $ | — | $ | 198.7 | $ | — | $ | — | ||||||||||||
Federal Home Loan Bank stock | $ | — | $ | — | $ | 4.9 | $ | — | $ | — | $ | — | ||||||||||||
Total equity securities | $ | 176.5 | $ | — | $ | 4.9 | $ | 198.7 | $ | — | $ | — | ||||||||||||
Short-term investments | $ | — | $ | 2.0 | $ | — | $ | — | $ | — | $ | — |
Equity Securities | ||||
(in millions) | ||||
Beginning balance, January 1, 2016 | $ | — | ||
Purchases | 4.9 | |||
Ending balance, June 30, 2016 | $ | 4.9 |
Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
(in millions) | ||||||||||||||||
At June 30, 2016 | ||||||||||||||||
Fixed maturity securities | ||||||||||||||||
U.S. Treasuries | $ | 120.1 | $ | 5.8 | $ | — | $ | 125.9 | ||||||||
U.S. Agencies | 22.0 | 1.3 | — | 23.3 | ||||||||||||
States and municipalities | 808.8 | 62.3 | — | 871.1 | ||||||||||||
Corporate securities | 919.0 | 41.6 | (1.8 | ) | 958.8 | |||||||||||
Residential mortgage-backed securities | 233.4 | 9.6 | — | 243.0 | ||||||||||||
Commercial mortgage-backed securities | 73.7 | 2.1 | — | 75.8 | ||||||||||||
Asset-backed securities | 28.5 | 0.1 | — | 28.6 | ||||||||||||
Total fixed maturity securities | 2,205.5 | 122.8 | (1.8 | ) | 2,326.5 | |||||||||||
Equity securities | ||||||||||||||||
Corporate equity securities | 108.5 | 68.9 | (0.9 | ) | 176.5 | |||||||||||
Federal Home Loan Bank stock | 4.9 | — | — | 4.9 | ||||||||||||
Total equity securities | 113.4 | 68.9 | (0.9 | ) | 181.4 | |||||||||||
Short-term investments | 2.0 | — | — | 2.0 | ||||||||||||
Total investments | $ | 2,320.9 | $ | 191.7 | $ | (2.7 | ) | $ | 2,509.9 |
At December 31, 2015 | ||||||||||||||||
Fixed maturity securities | ||||||||||||||||
U.S. Treasuries | $ | 116.4 | $ | 3.9 | $ | (0.1 | ) | $ | 120.2 | |||||||
U.S. Agencies | 23.0 | 1.4 | — | 24.4 | ||||||||||||
States and municipalities | 809.4 | 45.1 | — | 854.5 | ||||||||||||
Corporate securities | 913.4 | 19.9 | (8.0 | ) | 925.3 | |||||||||||
Residential mortgage-backed securities | 231.8 | 7.1 | (1.0 | ) | 237.9 | |||||||||||
Commercial mortgage-backed securities | 81.1 | 0.2 | (1.0 | ) | 80.3 | |||||||||||
Asset-backed securities | 46.0 | — | (0.1 | ) | 45.9 | |||||||||||
Total fixed maturity securities | 2,221.1 | 77.6 | (10.2 | ) | 2,288.5 | |||||||||||
Equity securities | ||||||||||||||||
Corporate equity securities | 137.5 | 65.8 | (4.6 | ) | 198.7 | |||||||||||
Equity securities | 137.5 | 65.8 | (4.6 | ) | 198.7 | |||||||||||
Total investments | $ | 2,358.6 | $ | 143.4 | $ | (14.8 | ) | $ | 2,487.2 |
Amortized Cost | Estimated Fair Value | |||||||
(in millions) | ||||||||
Due in one year or less | $ | 140.1 | $ | 141.7 | ||||
Due after one year through five years | 855.5 | 893.4 | ||||||
Due after five years through ten years | 615.5 | 660.0 | ||||||
Due after ten years | 258.8 | 284.0 | ||||||
Mortgage and asset-backed securities | 335.6 | 347.4 | ||||||
Total | $ | 2,205.5 | $ | 2,326.5 |
June 30, 2016 | December 31, 2015 | |||||||||||||||||||||
Estimated Fair Value | Gross Unrealized Losses | Number of Issues | Estimated Fair Value | Gross Unrealized Losses | Number of Issues | |||||||||||||||||
(in millions, except number of issues data) | ||||||||||||||||||||||
Less than 12 months: | ||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||
U.S. Treasuries | $ | — | $ | — | — | $ | 27.4 | $ | (0.1 | ) | 20 | |||||||||||
Corporate securities | — | — | — | 328.4 | (4.7 | ) | 122 | |||||||||||||||
Residential mortgage-backed securities | — | — | — | 50.5 | (0.8 | ) | 24 | |||||||||||||||
Commercial mortgage-backed securities | — | — | — | 51.5 | (1.0 | ) | 22 | |||||||||||||||
Asset-backed securities | — | — | — | 34.1 | — | 27 | ||||||||||||||||
Total fixed maturity securities | — | — | — | 491.9 | (6.6 | ) | 215 | |||||||||||||||
Equity securities | 10.9 | (0.9 | ) | 23 | 35.8 | (4.6 | ) | 45 | ||||||||||||||
Total less than 12 months | $ | 10.9 | $ | (0.9 | ) | 23 | $ | 527.7 | $ | (11.2 | ) | 260 | ||||||||||
12 months or greater: | ||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||
Corporate securities | $ | 28.9 | $ | (1.8 | ) | 12 | $ | 34.6 | $ | (3.3 | ) | 15 | ||||||||||
Residential mortgage-backed securities | — | — | — | 7.1 | (0.2 | ) | 25 | |||||||||||||||
Asset-backed securities | — | — | — | 11.1 | (0.1 | ) | 4 | |||||||||||||||
Total fixed maturity securities | 28.9 | (1.8 | ) | 12 | 52.8 | (3.6 | ) | 44 | ||||||||||||||
Total 12 months or greater | $ | 28.9 | $ | (1.8 | ) | 12 | $ | 52.8 | $ | (3.6 | ) | 44 | ||||||||||
Total available-for-sale: | ||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||
U.S. Treasuries | $ | — | $ | — | — | $ | 27.4 | $ | (0.1 | ) | 20 | |||||||||||
Corporate securities | 28.9 | (1.8 | ) | 12 | 363.0 | (8.0 | ) | 137 | ||||||||||||||
Residential mortgage-backed securities | — | — | — | 57.6 | (1.0 | ) | 49 | |||||||||||||||
Commercial mortgage-backed securities | — | — | — | 51.5 | (1.0 | ) | 22 | |||||||||||||||
Asset-backed securities | — | — | — | 45.2 | (0.1 | ) | 31 | |||||||||||||||
Total fixed maturity securities | 28.9 | (1.8 | ) | 12 | 544.7 | (10.2 | ) | 259 | ||||||||||||||
Equity securities | 10.9 | (0.9 | ) | 23 | 35.8 | (4.6 | ) | 45 | ||||||||||||||
Total available-for-sale | $ | 39.8 | $ | (2.7 | ) | 35 | $ | 580.5 | $ | (14.8 | ) | 304 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(in millions) | ||||||||||||||||
Net realized gains on investments | ||||||||||||||||
Fixed maturity securities | ||||||||||||||||
Gross gains | $ | 1.1 | $ | 0.3 | $ | 1.3 | $ | 0.3 | ||||||||
Gross losses | (0.4 | ) | (0.2 | ) | (0.5 | ) | (0.2 | ) | ||||||||
Net realized gains on fixed maturity securities | $ | 0.7 | $ | 0.1 | $ | 0.8 | $ | 0.1 | ||||||||
Equity securities | ||||||||||||||||
Gross gains | $ | 5.5 | $ | 1.9 | $ | 12.7 | $ | 3.5 | ||||||||
Gross losses | (0.2 | ) | (0.1 | ) | (6.0 | ) | (0.5 | ) | ||||||||
Net realized gains on equity securities | $ | 5.3 | $ | 1.8 | $ | 6.7 | $ | 3.0 | ||||||||
Total | $ | 6.0 | $ | 1.9 | $ | 7.5 | $ | 3.1 | ||||||||
Change in unrealized gains (losses) | ||||||||||||||||
Fixed maturity securities | $ | 24.3 | $ | (33.1 | ) | $ | 53.6 | $ | (19.0 | ) | ||||||
Equity securities | 5.6 | (6.7 | ) | 6.8 | (7.8 | ) | ||||||||||
Total | $ | 29.9 | $ | (39.8 | ) | $ | 60.4 | $ | (26.8 | ) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(in millions) | ||||||||||||||||
Fixed maturity securities | $ | 17.2 | $ | 17.9 | $ | 33.9 | $ | 34.3 | ||||||||
Equity securities | 1.8 | 1.2 | 3.7 | 2.3 | ||||||||||||
Cash equivalents and restricted cash | 0.1 | — | 0.1 | — | ||||||||||||
Gross investment income | 19.1 | 19.1 | 37.7 | 36.6 | ||||||||||||
Investment expenses | (0.7 | ) | (0.7 | ) | (1.5 | ) | (1.3 | ) | ||||||||
Net investment income | $ | 18.4 | $ | 18.4 | $ | 36.2 | $ | 35.3 |
Six Months Ended | ||||||
June 30, | ||||||
2016 | 2015 | |||||
Expense computed at statutory rate | 35.0 | % | 35.0 | % | ||
Dividends received deduction and tax-exempt interest | (7.3 | ) | (8.0 | ) | ||
LPT deferred gain amortization | (2.1 | ) | (4.5 | ) | ||
LPT reserve adjustment | (2.7 | ) | (2.1 | ) | ||
Pre-privatization reserve adjustment, excluding LPT | — | (4.9 | ) | |||
Other | 0.7 | 0.5 | ||||
Effective tax rate | 23.6 | % | 16.0 | % |
Six Months Ended | ||||||||
June 30, | ||||||||
2016 | 2015 | |||||||
(in millions) | ||||||||
Unpaid losses and LAE, gross of reinsurance, at beginning of period | $ | 2,347.5 | $ | 2,369.7 | ||||
Less reinsurance recoverable, excluding bad debt allowance, on unpaid losses and LAE | 628.2 | 669.5 | ||||||
Net unpaid losses and LAE at beginning of period | 1,719.3 | 1,700.2 | ||||||
Losses and LAE, net of reinsurance, incurred during the period related to: | ||||||||
Current period | 232.0 | 221.1 | ||||||
Prior periods | (2.3 | ) | 1.4 | |||||
Total net losses and LAE incurred during the period | 229.7 | 222.5 | ||||||
Paid losses and LAE, net of reinsurance, related to: | ||||||||
Current period | 19.1 | 20.1 | ||||||
Prior periods | 196.4 | 189.0 | ||||||
Total net paid losses and LAE during the period | 215.5 | 209.1 | ||||||
Ending unpaid losses and LAE, net of reinsurance | 1,733.5 | 1,713.6 | ||||||
Reinsurance recoverable, excluding bad debt allowance, on unpaid losses and LAE | 598.8 | 640.9 | ||||||
Unpaid losses and LAE, gross of reinsurance, at end of period | $ | 2,332.3 | $ | 2,354.5 |
June 30, 2016 | December 31, 2015 | |||||||
(in millions) | ||||||||
Net unrealized gain on investments, before taxes | $ | 189.0 | $ | 128.6 | ||||
Deferred tax expense on net unrealized gains | (66.2 | ) | (45.0 | ) | ||||
Total accumulated other comprehensive income, net | $ | 122.8 | $ | 83.6 |
Number Awarded | Weighted Average Fair Value on Date of Grant | Weighted Average Exercise Price | Aggregate Fair Value on Date of Grant | |||||||||||
(in millions) | ||||||||||||||
March 2016 | ||||||||||||||
Stock options(1) | 67,431 | $ | 8.38 | $ | 27.72 | $ | 0.6 | |||||||
RSUs(1) | 80,816 | 27.72 | — | 2.2 | ||||||||||
PSUs(2) | 97,236 | 27.72 | — | 2.7 | ||||||||||
May 2016 | ||||||||||||||
RSUs(1) | 17,892 | 30.18 | — | 0.5 |
(1) | The stock options and RSUs awarded in March 2016 were awarded to certain officers of the Company and vest 25% on March 15, 2017, and each of the subsequent three anniversaries of that date. The stock options and RSUs are subject to accelerated vesting in certain circumstances, including but not limited to: death, disability, retirement, or in connection with change of control of the Company. The stock options expire seven years from the date of grant. |
(2) | The PSUs awarded in March 2016 were awarded to certain officers of the Company and have a performance period of two years followed by an additional one year vesting period. The PSU awards are subject to certain performance goals with payouts that range from 0% to 200% of the target awards. The value shown in the table represents the aggregate number of PSUs awarded at the target level. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(in millions, except share data) | ||||||||||||||||
Net income available to stockholders—basic and diluted | $ | 26.3 | $ | 29.2 | $ | 47.3 | $ | 43.2 | ||||||||
Weighted average number of shares outstanding—basic | 32,629,525 | 32,066,981 | 32,521,672 | 31,906,401 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
PSUs | 178,254 | 88,543 | 158,643 | 205,697 | ||||||||||||
Stock options | 193,448 | 311,436 | 216,015 | 311,168 | ||||||||||||
RSUs | 42,872 | 40,536 | 57,194 | 59,964 | ||||||||||||
Dilutive potential shares | 414,574 | 440,515 | 431,852 | 576,829 | ||||||||||||
Weighted average number of shares outstanding—diluted | 33,044,099 | 32,507,496 | 32,953,524 | 32,483,230 |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Options, PSUs and RSUs excluded under the treasury method as the potential proceeds on settlement or exercise price were greater than the value of shares acquired | 155,833 | 345,369 | 118,317 | 306,407 |
June 30, 2016 | December 31, 2015 | |||||||
(in millions, except share data) | ||||||||
GAAP stockholders' equity | $ | 845.3 | $ | 760.8 | ||||
Deferred reinsurance gain–LPT Agreement | 180.7 | 189.5 | ||||||
Less: Accumulated other comprehensive income, net | 122.8 | 83.6 | ||||||
Adjusted stockholders' equity(1) | $ | 903.2 | $ | 866.7 | ||||
Common shares outstanding | 32,463,660 | 32,216,480 |
(1) | Adjusted stockholders' equity is a non-GAAP measure that is defined as total stockholders' equity plus the Deferred reinsurance gain–LPT Agreement (Deferred Gain), less Accumulated other comprehensive income, net. We believe that Adjusted stockholders' equity is an important supplemental measure of our capital position. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(in millions) | ||||||||||||||||
Gross premiums written | $ | 190.6 | $ | 190.6 | $ | 381.3 | $ | 364.6 | ||||||||
Net premiums written | 188.7 | 188.3 | 377.4 | 360.2 | ||||||||||||
Net premiums earned | $ | 176.9 | $ | 170.6 | $ | 349.5 | $ | 329.6 | ||||||||
Net investment income | 18.4 | 18.4 | 36.2 | 35.3 | ||||||||||||
Net realized gains on investments | 6.0 | 1.9 | 7.5 | 3.1 | ||||||||||||
Other income | 0.5 | — | 0.6 | 0.1 | ||||||||||||
Total revenues | 201.8 | 190.9 | 393.8 | 368.1 | ||||||||||||
Losses and LAE | 111.7 | 101.5 | 219.0 | 207.7 | ||||||||||||
Commission expense | 21.9 | 22.9 | 42.2 | 41.6 | ||||||||||||
Underwriting and other operating expenses | 33.6 | 32.5 | 69.9 | 66.0 | ||||||||||||
Interest expense | 0.4 | 0.7 | 0.8 | 1.4 | ||||||||||||
Income tax expense | 7.9 | 4.1 | 14.6 | 8.2 | ||||||||||||
Total expenses | 175.5 | 161.7 | 346.5 | 324.9 | ||||||||||||
Net income | $ | 26.3 | $ | 29.2 | $ | 47.3 | $ | 43.2 | ||||||||
Less amortization of the Deferred Gain related to losses | $ | 2.2 | $ | 2.3 | $ | 4.8 | $ | 4.8 | ||||||||
Less amortization of the Deferred Gain related to contingent commission | 0.5 | 0.5 | 1.0 | 1.0 | ||||||||||||
Less impact of LPT Reserve Adjustments(1) | 3.1 | 6.4 | 3.1 | 6.4 | ||||||||||||
Less impact of LPT Contingent Commission Adjustments(1) | 1.8 | 2.4 | 1.8 | 2.6 | ||||||||||||
Net income before impact of the LPT Agreement(2) | $ | 18.7 | $ | 17.6 | $ | 36.6 | $ | 28.4 |
(1) | Any adjustment to the contingent profit commission under the LPT Agreement results in a cumulative adjustment to the Deferred Gain, which is recognized in losses and LAE incurred in the Consolidated Statements of Comprehensive Income, such that the Deferred Gain reflects the balance that would have existed had the revised contingent profit commission been recognized at the inception of the LPT Agreement (LPT Contingent Commission Adjustments). |
(2) | We define net income before impact of the LPT Agreement as net income before the impact of: (a) amortization of Deferred Gain; (b) adjustments to LPT Agreement ceded reserves; and (c) adjustments to contingent commission receivable–LPT Agreement. Deferred Gain reflects the unamortized gain from our LPT Agreement. Under GAAP, this gain is deferred and is being amortized using the recovery method. Amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries over the life of the LPT Agreement, except for the contingent profit commission, which is amortized through June 30, 2024. The amortization is reflected in losses and LAE. We periodically reevaluate the remaining direct reserves subject to the LPT Agreement and the expected losses and LAE subject to the contingent profit commission under the LPT Agreement. Our reevaluation results in corresponding adjustments, if needed, to reserves, ceded reserves, contingent commission receivable, and the Deferred Gain, with the net effect being an increase or decrease to net income. Net income before impact of the LPT Agreement is not a measurement of financial performance under GAAP, but rather reflects a 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 or net income, or any other measure of performance derived in accordance with GAAP. |
As of June 30, 2016 | |||||||||||||||||
Year-to-Date Increase (Decrease) | Year-Over-Year Increase (Decrease) | ||||||||||||||||
Overall | California | All Other States | Overall | California | All Other States | ||||||||||||
In-force premiums | (0.8 | )% | (1.5 | )% | 0.1 | % | (2.1 | )% | (4.4 | )% | 1.1 | % | |||||
In-force policy count | 0.3 | (2.8 | ) | 3.7 | — | (5.6 | ) | 6.5 | |||||||||
Average in-force policy size | (1.1 | ) | 1.3 | (3.5 | ) | (2.1 | ) | 1.3 | (5.0 | ) | |||||||
In-force payroll exposure | 0.1 | 0.7 | (0.3 | ) | 1.0 | 0.2 | 1.4 | ||||||||||
Net rate(1) | (0.9 | ) | (2.2 | ) | 0.3 | (3.0 | ) | (4.7 | ) | (0.3 | ) |
(1) | Net rate, defined as total in-force premiums 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. |
June 30, 2016 | December 31, 2015 | June 30, 2015 | December 31, 2014 | |||||||||||||||||||||||||
State | In-force Premiums | Policies In-force | In-force Premiums | Policies In-force | In-force Premiums | Policies In-force | In-force Premiums | Policies In-force | ||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||
California | $ | 347.0 | 42,858 | $ | 352.2 | 44,080 | $ | 363.1 | 45,404 | $ | 370.8 | 47,093 | ||||||||||||||||
Other | 267.5 | 41,910 | 267.3 | 40,416 | 264.5 | 39,368 | 257.1 | 38,209 | ||||||||||||||||||||
Total | $ | 614.5 | 84,768 | $ | 619.5 | 84,496 | $ | 627.6 | 84,772 | $ | 627.9 | 85,302 |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Loss and LAE ratio | 63.1 | % | 59.5 | % | 62.7 | % | 63.0 | % | ||||
Underwriting and other operating expenses ratio | 19.0 | 19.1 | 19.9 | 20.1 | ||||||||
Commission expense ratio | 12.4 | 13.4 | 12.1 | 12.6 | ||||||||
Combined ratio | 94.5 | % | 92.0 | % | 94.7 | % | 95.7 | % |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(in millions) | ||||||||||||||||
Prior accident year favorable (unfavorable) loss development, net | $ | 2.0 | $ | 0.3 | $ | 2.3 | $ | (1.4 | ) | |||||||
Amortization of the Deferred Gain related to losses | $ | 2.2 | $ | 2.3 | $ | 4.8 | $ | 4.8 | ||||||||
Amortization of the Deferred Gain related to contingent commission | 0.5 | 0.5 | 1.0 | 1.0 | ||||||||||||
Impact of LPT Reserve Adjustments | 3.1 | 6.4 | 3.1 | 6.4 | ||||||||||||
Impact of LPT Contingent Commission Adjustments | 1.8 | 2.4 | 1.8 | 2.6 | ||||||||||||
Total impact of the LPT on losses and LAE | 7.6 | 11.6 | 10.7 | 14.8 | ||||||||||||
Total losses and LAE reserve adjustments | $ | 9.6 | $ | 11.9 | $ | 13.0 | $ | 13.4 |
June 30, | ||||||||
2016 | 2015 | |||||||
(in millions) | ||||||||
Cash and cash equivalents provided by (used in): | ||||||||
Operating activities | $ | 41.4 | $ | 62.7 | ||||
Investing activities | 35.6 | (100.4 | ) | |||||
Financing activities | (5.4 | ) | (1.0 | ) | ||||
Increase (Decrease) in cash and cash equivalents | $ | 71.6 | $ | (38.7 | ) |
Payment Due By Period | ||||||||||||||||||||
Total | Less Than 1-Year | 1-3 Years | 4-5 Years | More Than 5 Years | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Operating leases | $ | 18.1 | $ | 5.1 | $ | 7.7 | $ | 4.8 | $ | 0.5 | ||||||||||
Purchased liabilities | 6.6 | 3.4 | 2.6 | 0.6 | — | |||||||||||||||
Notes payable(1) | 59.9 | 1.5 | 3.1 | 3.1 | 52.2 | |||||||||||||||
Capital leases | 0.6 | 0.3 | 0.3 | — | — | |||||||||||||||
Losses and LAE reserves (2)(3) | 2,332.3 | 378.5 | 470.6 | 278.8 | 1,204.4 | |||||||||||||||
Total contractual obligations | $ | 2,417.5 | $ | 388.8 | $ | 484.3 | $ | 287.3 | $ | 1,257.1 |
(1) | Notes payable obligations reflect payments for the principal and estimated interest expense based on LIBOR plus a margin. The estimated interest expense was based on the contractual obligations of the debt outstanding as of June 30, 2016. The interest rates range from 4.7% to 4.9%. |
(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 paid claims 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 millions) | ||||||||||||||||||||
Reinsurance recoverables for unpaid losses | $ | (598.8 | ) | $ | (30.5 | ) | $ | (57.7 | ) | $ | (53.6 | ) | $ | (457.0 | ) |
Category | Estimated Fair Value | Percentage of Total | Book Yield | Tax Equivalent Yield | |||||||||
(in millions, except percentages) | |||||||||||||
U.S. Treasuries | $ | 125.9 | 5.1 | % | 1.9 | % | 1.9 | % | |||||
U.S. Agencies | 23.3 | 0.9 | 4.8 | 4.8 | |||||||||
States and municipalities | 871.1 | 34.7 | 3.2 | 4.6 | |||||||||
Corporate securities | 958.8 | 38.2 | 3.2 | 3.2 | |||||||||
Residential mortgage-backed securities | 243.0 | 9.7 | 3.1 | 3.1 | |||||||||
Commercial mortgage-backed securities | 75.8 | 3.0 | 2.5 | 2.5 | |||||||||
Asset-backed securities | 28.6 | 1.1 | 1.5 | 1.5 | |||||||||
Equity securities | 181.4 | 7.2 | 5.6 | 6.6 | |||||||||
Short-term investments | 2.0 | 0.1 | 0.4 | 0.4 | |||||||||
Total | $ | 2,509.9 | 100.0 | % | |||||||||
Weighted average yield | 3.2 | % | 3.7 | % |
Rating | Percentage of Total Estimated Fair Value | ||
“AAA” | 10.1 | % | |
“AA” | 47.8 | ||
“A” | 27.8 | ||
“BBB” | 13.6 | ||
Below investment grade | 0.7 | ||
Total | 100.0 | % |
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) | ||||||||||||||
April 1 – April 30, 2016 | 74,634 | $ | 28.07 | 74,634 | $ | 46.9 | ||||||||
May 1 – May 31, 2016 | 39,393 | 29.75 | 39,393 | 45.7 | ||||||||||
June 1 – June 30, 2016 | 90,927 | 28.80 | 90,927 | 43.1 | ||||||||||
Total | 204,954 | $ | 28.71 | 204,954 |
(1) | Includes fees and commissions paid on stock repurchases. |
(2) | On February 16, 2016, the Board of Directors authorized a share repurchase program for repurchases of up to $50 million of the Company's common stock (the 2016 Program). We expect that shares may be purchased at prevailing market prices through February 22, 2018 through a variety of methods, including open market or private transactions, in accordance with applicable laws and regulations and as determined by management. The timing and actual number of shares repurchased will depend on a variety of factors, including the share price, corporate and regulatory requirements, and other market and economic conditions. Repurchases under the 2016 Program may be commenced, modified, or suspended from time to time without prior notice, and the program may be suspended or discontinued at any time. |
Incorporated by Reference Herein | ||||||||||
Exhibit No. | Description of Exhibit | Included Herewith | Form | Exhibit | Filing Date | |||||
*10.1 | Amendment No. 1, dated January 29, 2016, to Employment Agreement effective November 10, 2014 by and between Employers Holdings, Inc. and Terry Eleftheriou | 8-K | 10.1 | February 2, 2016 | ||||||
31.1 | Certification of Douglas D. Dirks Pursuant to Section 302 | X | ||||||||
31.2 | Certification of Terry Eleftheriou Pursuant to Section 302 | X | ||||||||
32.1 | Certification of Douglas D. Dirks Pursuant to Section 906 | X | ||||||||
32.2 | Certification of Terry Eleftheriou 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: | July 28, 2016 | /s/ Douglas D. Dirks |
Douglas D. Dirks | ||
President and Chief Executive Officer | ||
Employers Holdings, Inc. |
Date: | July 28, 2016 | /s/ Terry Eleftheriou |
Terry Eleftheriou | ||
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: | July 28, 2016 | /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: | July 28, 2016 | /s/ Terry Eleftheriou |
Terry Eleftheriou | ||
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: | July 28, 2016 | /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: | July 28, 2016 | /s/ Terry Eleftheriou |
Terry Eleftheriou | ||
Executive Vice President and Chief Financial Officer | ||
Employers Holdings, Inc. | ||
(Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jul. 21, 2016 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2016 | |
Entity Registrant Name | Employers Holdings, Inc. | |
Entity Central Index Key | 0001379041 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well Know Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock Shares Outstanding | 32,438,110 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q2 |
Conolidated Statements of Comprehensive Income (Parentheticals) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Income Statement Parenthetical [Abstract] | ||||
Other comprehensive income (loss), unrealized holding gain (loss) on securities arising during period, tax | $ 12,600 | $ (13,300) | $ 23,800 | $ (8,300) |
Other comprehensive income (loss), reclassification adjustment for sale of securities included in net income, tax | $ 2,100 | $ 700 | $ 2,600 | $ 1,100 |
Basis of Presentation |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Basis of Presentation and Summary of Operations Employers Holdings, Inc. (EHI) is a Nevada holding company. Through its wholly owned insurance subsidiaries, Employers Insurance Company of Nevada (EICN), Employers Compensation Insurance Company (ECIC), Employers Preferred Insurance Company (EPIC), and Employers Assurance Company (EAC), EHI is engaged in the commercial property and casualty insurance industry, specializing in workers' compensation products and services. Unless otherwise indicated, all references to the “Company” refer to EHI, together with its subsidiaries. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of the Company’s consolidated financial position and results of operations for the periods presented have been included. The results of operations for an interim period are not necessarily indicative of the results for an entire year. These financial statements have been prepared consistent with the accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The Company considers an operating segment to be any component of its business whose operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance based on discrete financial information. Currently, the Company has one operating segment, workers’ compensation insurance and related services. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. As a result, actual results could differ from these estimates. The most significant areas that require management judgment are the estimate of unpaid losses and loss adjustment expenses (LAE), evaluation of reinsurance recoverables, recognition of premium revenue, deferred income taxes, and investments. Reclassifications Certain prior period information has been reclassified to conform to the current period presentation. |
Changes in Estimates Level 1 (Notes) |
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Changes in Estimates [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in Estimates | Change in Estimates The Company reduced its estimated reserves ceded under the Loss Portfolio Transfer Agreement (LPT Reserve Adjustment) as a result of the determination that an adjustment was necessary to reflect observed favorable paid loss trends during the second quarter of 2016. The following table shows the financial statement impact related to the reduction in estimated reserves ceded under the Loss Portfolio Transfer Agreement (LPT Agreement).
The Company increased its estimate of contingent commission receivable – LPT Agreement (LPT Contingent Commission Adjustment) as a result of the determination that an adjustment was necessary to reflect observed favorable paid loss trends during the second quarter of 2016. The following table shows the financial statement impact related to these changes in estimates.
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New Accounting Standards Level 1 (Notes) |
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Jun. 30, 2016 | |
New Accounting Standards [Abstract] | |
New Accounting Standards | New Accounting Standards In January 2016, the FASB issued ASU Number 2016-01, Financial Instruments - Overall (Subtopic 825-10). This update replaces the guidance to classify equity securities with readily determinable fair values into different categories (trading or available-for-sale) and requires equity securities to be measured at fair value with changes in fair value recognized through net income. Additionally, this update eliminates the method and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost. It requires financial instruments to be measured at fair value using the exit price notion. Furthermore, this update clarifies that an evaluation of deferred tax assets related to available-for-sale securities is needed, in combination with an evaluation of other deferred tax assets, to determine if a valuation allowance is required. This update becomes effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company has determined that at June 30, 2016, adoption of this guidance would result in a $68.0 million reclassification adjustment, net of tax, between retained earnings and accumulated other comprehensive income. The Company has not yet estimated the full impact that the adoption will have on its consolidated statement of comprehensive income. In February 2016, the FASB issued ASU Number 2016-02, Leases (Topic 842). This update provides guidance on a new lessee model that includes the recognition of assets and liabilities arising from lease transactions on the balance sheet. Additionally, the update provides clarity on the definition of a lease and the distinction between finance and operating leases. Furthermore, the update requires certain qualitative and quantitative disclosures pertaining to the amounts recorded in the financial statements. This update becomes effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2018 and early adoption is permitted. The Company has not yet estimated the full impact that the adoption will have on its consolidated financial condition and results of operations. In March 2016, the FASB issued ASU Number 2016-09, Compensation - Stock Compensation (Topic 718). This update simplifies several aspects of the accounting for share based-payment award transactions including income taxes and classification of awards on the balance sheet and on the statement of cash flows. This update becomes effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2016 and early adoption is permitted. The Company has not yet estimated the full impact that the adoption will have on its consolidated financial condition and results of operations. In June 2016, the FASB issued ASU Number 2016-13, Financial Instruments - Credit Losses (Topic 326). This update replaces the incurred loss impairment methodology for recognizing credit losses on financial instruments with a methodology that reflects an entity's current estimate of all expected credit losses. This update requires financial assets measured at amortized cost to be presented net of an allowance for credit losses. Additionally, this update requires credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down, allowing an entity to also record reversals of credit losses in current period net income. This update becomes effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has not yet estimated the full impact that the adoption will have on its consolidated financial condition and results of operations. |
Fair Value of Financial Instruments |
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Fair Value of Financial Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying value and the estimated fair value of the Company’s financial instruments were as follows:
Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based upon the levels of judgment associated with the inputs used to measure their fair value. Level inputs are defined as follows:
Fair values of available-for-sale fixed maturity and equity securities are based on quoted market prices, where available. If quoted market prices and an estimate determined by using objectively verifiable information are unavailable, the Company produces an estimate of fair value based on internally developed valuation techniques, which, depending on the level of observable market inputs, will render the fair value estimate as Level 2 or Level 3. The Company bases all of its estimates of fair value for assets on the bid price, as it represents what a third-party market participant would be willing to pay in an arm's length transaction. These methods of valuation will only produce an estimate of fair value if there is objectively verifiable information to produce a valuation. If objectively verifiable information is not available, the Company would be required to produce an estimate of fair value using some of the same methodologies, making assumptions for market-based inputs that are unavailable. The Company's estimates of fair value for financial liabilities are based on the interest rates for notes with similar durations to discount the projection of future payments on notes payable. The fair value measurements for notes payable have been determined to be Level 2. The following table presents the items on the accompanying consolidated balance sheets that are stated at fair value and the corresponding fair value measurements.
The following table provides a reconciliation of the beginning and ending balances that are measured using Level 3 inputs for the six months ended June 30, 2016.
Each of the Company's insurance operating subsidiaries is a member of the Federal Home Loan Bank (FHLB) of San Francisco. Members are required to purchase stock in the FHLB in addition to maintaining collateral deposits that back any funds advanced. Investment in FHLB stock is recorded at cost, as purchases and sales of these securities are at par value with the issuer. The stock is considered a restricted security and is periodically evaluated for impairment based on the ultimate recovery of par value. Due to the nature of FHLB stock, its carrying value approximates fair value. |
Investments |
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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 June 30, 2016, 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 those that have been in a continuous unrealized loss position for 12 months or greater as of June 30, 2016 and December 31, 2015.
Based on reviews of the fixed maturity securities, the Company determined that unrealized losses for the six months ended June 30, 2016 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 amortized cost, or principal value upon maturity. Based on reviews of the equity securities, the Company recognized a total impairment of $5.3 million in the fair value of 32 equity securities for the six months ended June 30, 2016, as a result of the Company's intent to sell and/or the severity and duration of the change in fair value of the securities. The remaining unrealized losses on equity securities were not considered to be other-than-temporary due to the financial condition and near-term prospects of the issuers. The other-than-temporary impairment of equity securities was primarily due to the Company's intent to sell certain securities and the downturn in the energy sector that continued through the first quarter of 2016. Net realized gains on investments 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 June 30, 2016 and December 31, 2015, securities having a fair value of $1,139.7 million and $881.2 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. 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 and restricted cash and cash equivalents held in trust for the benefit of ceding reinsurers at June 30, 2016 and December 31, 2015 was $27.7 million and $32.7 million, respectively. |
Income Taxes |
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Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Income tax expense for interim periods is measured using an estimated effective tax rate for the annual period. The following is a reconciliation of the federal statutory income tax rate to the Company’s effective tax rates for the periods presented.
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Liability for Unpaid Losses and Loss Adjustment Expenses |
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Liability for Unpaid Losses and Loss Adjustment Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Unpaid Losses and Loss Adjustment Expenses | Liability for Unpaid Losses and Loss Adjustment Expenses The following table represents a reconciliation of changes in the liability for unpaid losses and LAE.
Total net losses and LAE included in the above table excludes the impact of the aggregate of amortization of the deferred reinsurance gain—LPT Agreement, LPT Reserve Adjustments, and LPT Contingent Commission Adjustments, which totaled $10.7 million and $14.8 million for the six months ended June 30, 2016 and 2015, respectively (Note 8). The change in the estimates of incurred losses and LAE attributable to insured events for prior periods was related to the Company's assigned risk business. |
LPT Agreement |
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Jun. 30, 2016 | |
LPT Agreement [Abstract] | |
LPT Agreement | LPT Agreement The Company is party to a 100% quota share retroactive reinsurance agreement (LPT Agreement) under which $1.5 billion in liabilities for losses and LAE related to claims incurred by EICN prior to July 1, 1995 were reinsured for consideration of $775.0 million. The LPT Agreement provides coverage up to $2.0 billion. The initial Deferred Gain resulting from the LPT Agreement was recorded as a liability in the accompanying consolidated balance sheets as Deferred reinsurance gain–LPT Agreement. The Company is also entitled to receive a contingent profit commission under the LPT Agreement. The contingent profit commission is an amount based on the favorable difference between actual paid losses and LAE and expected paid losses and LAE as established in the LPT Agreement. The Company records its estimate of contingent profit commission in the accompanying consolidated balance sheets as Contingent commission receivable–LPT Agreement and a corresponding liability is recorded in the accompanying consolidated balance sheets in Deferred reinsurance gain–LPT Agreement. The Deferred Gain is being amortized using the recovery method. Amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries over the life of the LPT Agreement, except for the contingent profit commission, which is amortized through June 30, 2024, the date through which the Company is entitled to receive a contingent profit commission under the LPT Agreement. The amortization is recorded in losses and LAE incurred in the accompanying consolidated statements of comprehensive income. Any adjustments to the Deferred Gain are recorded in losses and LAE incurred in the accompanying consolidated statements of comprehensive income. The Company amortized $5.8 million of the Deferred Gain for each of the six months ended June 30, 2016 and 2015. Additionally, the Deferred Gain was reduced by $3.1 million and $6.4 million for the six months ended June 30, 2016 and 2015, respectively, due to a favorable LPT Reserve Adjustment and by $1.8 million and $2.6 million for the six months ended June 30, 2016 and 2015, respectively, due to a favorable LPT Contingent Commission Adjustment. The remaining Deferred Gain was $180.7 million and $189.5 million as of June 30, 2016 and December 31, 2015, respectively. The estimated remaining liabilities subject to the LPT Agreement were $479.4 million and $498.0 million as of June 30, 2016 and December 31, 2015, respectively. Losses and LAE paid with respect to the LPT Agreement totaled $708.8 million and $695.2 million from inception through June 30, 2016 and December 31, 2015, respectively. |
Accumulated Other Comprehensive Income |
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income, Net | Accumulated Other Comprehensive Income, net Accumulated other comprehensive income, net, is comprised of unrealized gains on investments classified as available-for-sale, net of deferred tax expense. The following table summarizes the components of accumulated other comprehensive income, net:
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Stock-Based Compensation |
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Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based compensation | Stock-Based Compensation The Company awarded stock options, restricted stock units (RSUs) and performance share units (PSUs) to certain officers of the Company as follows:
The RSUs awarded in May 2016 were awarded to non-employee Directors of the Company and have a service vesting period of one year from the date of grant.
A total of 438,774 and 463,466 stock options were exercised during the six months ended June 30, 2016 and the year ended December 31, 2015, respectively. |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share Basic earnings per share excludes dilution and is computed by dividing income applicable to stockholders by the weighted average number of shares outstanding for the period. Diluted earnings per share reflects the potential dilutive impact of all convertible securities on earnings per share. Diluted earnings per share includes shares assumed issued under the “treasury stock method,” which reflects the potential dilution that would occur if outstanding RSUs and PSUs had vested and options were to be exercised. The following table presents the net income and the weighted average number of shares outstanding used in the earnings per common share calculations.
Diluted earnings per share excludes outstanding options and other common stock equivalents in periods where the inclusion of such options and common stock equivalents would be anti-dilutive. The following table presents options, PSUs, and RSUs that were excluded from diluted earnings per share.
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Changes in Estimates (Tables) |
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Estimates [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change due to estmated reserves ceded under the LPT Agreement table | The following table shows the financial statement impact related to the reduction in estimated reserves ceded under the Loss Portfolio Transfer Agreement (LPT Agreement).
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Change to contingent profit commission table | The following table shows the financial statement impact related to these changes in estimates.
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Fair Value of Financial Instruments (Tables) |
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Fair Value of Financial Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated fair value of financial instruments table | The carrying value and the estimated fair value of the Company’s financial instruments were as follows:
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Fair value, assets and liabilities measured on recurring basis table | The following table presents the items on the accompanying consolidated balance sheets that are stated at fair value and the corresponding fair value measurements.
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Fair value, assets measured on recurring basis, unobservable input reconciliation table | The following table provides a reconciliation of the beginning and ending balances that are measured using Level 3 inputs for the six months ended June 30, 2016.
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Investments (Tables) |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities table | The cost or amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the Company’s investments were as follows:
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Investments classified by contractual maturity date table | The amortized cost and estimated fair value of fixed maturity securities at June 30, 2016, 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.
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Unrealized loss on investments table | The following is a summary of investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or greater as of June 30, 2016 and December 31, 2015.
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Net realized gains and change in unrealized gains (losses), available for sale securities table | ealized gains on investments and the change in unrealized gains (losses) on fixed maturity and equity securities are determined on a specific-identification basis and were as follows:
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Investment income table | Net investment income was as follows:
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Income Taxes (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of federal staturoty income tax rates to the effective tax rates table | The following is a reconciliation of the federal statutory income tax rate to the Company’s effective tax rates for the periods presented.
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Liability for Unpaid Losses and Loss Adjustment Expenses (Tables) |
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Unpaid Losses and Loss Adjustment Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the liability for unpaid losses and LAE table | The following table represents a reconciliation of changes in the liability for unpaid losses and LAE.
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Accumulated Other Comprehensive Income (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accumulated other comprehensive income (loss) table | The following table summarizes the components of accumulated other comprehensive income, net:
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Stock-Based Compensation Stock-Based Compensation (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation arrangements by share-based payment award table | The Company awarded stock options, restricted stock units (RSUs) and performance share units (PSUs) to certain officers of the Company as follows:
The RSUs awarded in May 2016 were awarded to non-employee Directors of the Company and have a service vesting period of one year from the date of grant.
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Earnings Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income and weighted average common shares outstanding used in earnings per share calculations table | The following table presents the net income and the weighted average number of shares outstanding used in the earnings per common share calculations.
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Antidilutive securities excluded from computation of earnings per share table | The following table presents options, PSUs, and RSUs that were excluded from diluted earnings per share.
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FInancial Statement Notes DEI Deferred reinsurance gain—LPT Agreement, LPT Reserve Adjustments, and LPT Contingent Commission Adjustments (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Losses and LAE Note [Abstract] | ||
Amortization of deferred gain | $ 5.8 | $ 5.8 |
Impact of the LPT Agreement | $ 10.7 | $ 14.8 |
Basis of Presentation (Details) |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Basis of Presentation [Abstract] | |
Number of Operating Segments | 1 |
FInancial Statement Notes DEI FASB Issued (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Accumulated other comprehensive income, net | $ 122,800 | $ 83,600 |
Reclassification between AOCI and Retained earnings [Member] | ||
Accumulated other comprehensive income, net | $ 68,000 |
Changes in Estimates (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Change in Accounting Estimate [Line Items] | ||||
Net income | $ 26,300 | $ 29,200 | $ 47,300 | $ 43,200 |
Basic | $ 0.81 | $ 0.91 | $ 1.45 | $ 1.35 |
Diluted | $ 0.80 | $ 0.90 | $ 1.44 | $ 1.33 |
Change Due to Estimated Reserves Ceded Under the LPT Agreement [Member] | ||||
Change in Accounting Estimate [Line Items] | ||||
Change to estimated reserves ceded under the LPT agreement | $ (5,000) | $ (5,000) | ||
Cumulative adjustment to the Deferred Gain | (3,100) | (3,100) | $ (6,400) | |
Net income | $ 3,100 | $ 3,100 | ||
Basic | $ 0.10 | $ 0.10 | ||
Diluted | $ 0.09 | $ 0.09 | ||
Change to Contingent Profit Commission [Member] | ||||
Change in Accounting Estimate [Line Items] | ||||
Change in estimate of contingent commission receivable | $ 1,900 | $ 1,900 | ||
Cumulative adjustment to the Deferred Gain | (1,800) | (1,800) | $ (2,600) | |
Net income | $ 1,800 | $ 1,800 | ||
Basic | $ 0.06 | $ 0.06 | ||
Diluted | $ 0.05 | $ 0.05 |
New Accounting Standards Issued FASB (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Retained earnings | $ 723,500 | $ 682,000 |
Reclassification between AOCI and Retained earnings [Member] | ||
Retained earnings | $ 68,000 |
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
Jun. 30, 2015 |
Dec. 31, 2014 |
---|---|---|---|---|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Investments | $ 2,509,900 | $ 2,487,200 | ||
Investments, fair value | 2,509,900 | 2,487,200 | ||
Cash and cash equivalents | 128,200 | 56,600 | $ 64,900 | $ 103,600 |
Cash and cash equivalents, estimated fair value | 128,200 | 56,600 | ||
Restricted cash and cash equivalents | 2,400 | 2,500 | ||
Notes payable | 32,000 | 32,000 | ||
Notes Payable, fair value | 34,300 | 36,600 | ||
Estimate of Fair Value, Fair Value Disclosure [Member] | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Investments | 27,700 | 32,700 | ||
Restricted cash and cash equivalents | $ 2,400 | $ 2,500 |
Fair Value of Financial Instruments Fair Value of Financial Instruments, Reconciliation of Level 3 Securities (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Investments | $ 2,509.9 | $ 2,487.2 |
Purchases, Issuances, Settlements, net | 4.9 | |
Equity Securities [Member] | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Investments | 181.4 | 198.7 |
Equity Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Investments | $ 4.9 | $ 0.0 |
Investments, Amortized Cost and Estimated Fair Value (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Amortized Cost | ||
Due in one year or less, amortized cost | $ 140,100 | |
Due after one year through five years, amortized cost | 855,500 | |
Due after five years through ten years, amortized cost | 615,500 | |
Due after ten years, amortized cost | 258,800 | |
Mortgage and asset-backed securities, amortized cost | 335,600 | |
Total, amortized cost | 2,205,500 | |
Estimated Fair Value | ||
Due in one year or less, fair value | 141,700 | |
Due after one year through five years, fair value | 893,400 | |
Due after five years through ten years, fair value | 660,000 | |
Due after ten years, fair value | 284,000 | |
Mortgage and asset-backed securities, fair value | 347,400 | |
Total, fair value | $ 2,326,500 | $ 2,288,500 |
Net Investment Income (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Investment income | $ 19.1 | $ 19.1 | $ 37.7 | $ 36.6 |
Investment expenses | 0.7 | 0.7 | 1.5 | 1.3 |
Net investment income | 18.4 | 18.4 | 36.2 | 35.3 |
Debt Securities [Member] | ||||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Investment income related to fixed maturity securities and short-term investments and cash equivalents | 17.2 | 17.9 | 33.9 | 34.3 |
Equity Securities [Member] | ||||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Investment income related to equity securities | $ 1.8 | $ 1.2 | $ 3.7 | $ 2.3 |
Income Taxes (Details) |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Effective Income Tax Rate, Continuing Operations, Tax Rate Reconciliation [Abstract] | ||
Expense computed at statutory rate | 35.00% | 35.00% |
Dividends received deduction and tax-exempt interest | (7.30%) | (8.00%) |
LPT deferred gain amortization | (2.10%) | (4.50%) |
LPT reserve adjustment | (2.70%) | (2.10%) |
Pre-privatization reserve adjustment, excluding LPT | 0.00% | (4.90%) |
Other | 0.70% | 0.50% |
Effective tax rate | 23.60% | 16.00% |
Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Net unrealized gain on investments, before taxes | $ 189,000 | $ 128,600 |
Deferred tax expense on net unrealized gains | (66,200) | (45,000) |
Accumulated other comprehensive income, net | $ 122,800 | $ 83,600 |
Earnings Per Share (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Earnings Per Share, Basic and Diluted, by Common Class [Line Items] | ||||
Net income available to stockholders - basic and diluted | $ 26,300 | $ 29,200 | $ 47,300 | $ 43,200 |
Weighted average number of shares outstanding - basic | 32,629,525 | 32,066,981 | 32,521,672 | 31,906,401 |
Effect of dilutive securities: | ||||
Dilutive securities | 414,574 | 440,515 | 431,852 | 576,829 |
Weighted average number of shares outstanding - diluted | 33,044,099 | 32,507,496 | 32,953,524 | 32,483,230 |
Antidilutive securites excluded under the treasury method from computation of earnings per share | 155,833 | 345,369 | 118,317 | 306,407 |
Employee Stock Option [Member] | ||||
Effect of dilutive securities: | ||||
Dilutive securities | 193,448 | 311,436 | 216,015 | 311,168 |
Restricted Stock Units (RSUs) [Member] | ||||
Effect of dilutive securities: | ||||
Dilutive securities | 42,872 | 40,536 | 57,194 | 59,964 |
Performance Shares [Member] | ||||
Effect of dilutive securities: | ||||
Dilutive securities | 178,254 | 88,543 | 158,643 | 205,697 |
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