Employers Holdings, Inc. Reports Second Quarter 2013 Earnings and Declares Third Quarter 2013 Dividend

  Employers Holdings, Inc. Reports Second Quarter 2013 Earnings and Declares
  Third Quarter 2013 Dividend

                                Key Highlights

              (Q2, 2013 compared to Q2, 2012 except where noted)

  *Net income before the LPT of $9.9 million; up $0.29 per diluted share
  *Overall net rate up 10.1%
  *Net written premiums of $187.0 million; up 24%
  *Net earned premiums of $160.0 million; up 34%
  *Revenues of $181.6 million; up 31%
  *Combined ratio before the LPT improved 10.8 percentage points

Business Wire

RENO, Nev. -- August 7, 2013

Employers Holdings, Inc. (“EHI” or the “Company”) (NYSE:EIG) today reported
second quarter 2013 net income of $14.6 million or $0.46 per diluted share.
Net income in the second quarter of 2012 was $5.0 million or $0.16 per diluted
share.

Net income includes amortization of the deferred reinsurance gain related to
the Loss Portfolio Transfer (“LPT”) Agreement. Consolidated net income before
the impact of the LPT deferred reinsurance gain (the Company's non-GAAP
measure described below) was $9.9 million or $0.31 per diluted share in the
second quarter of 2013 and $0.7 million or $0.02 per diluted share in the
second quarter of 2012.

The second quarter 2013 combined ratio was 103.2% and 106.1% before the impact
of the LPT deferred reinsurance gain, compared with 113.3% and 116.9% before
the impact of the LPT deferred reinsurance gain for the second quarter of
2012. Year over year, the combined ratio improved 10.1 percentage points on a
GAAP basis and 10.8 percentage points before the impact of the LPT.

Adjusted for the LPT, book value per share was $25.68 at the end of the second
quarter compared with $26.66 at year-end 2012, a decline of $0.98. Rising
interest rates in the second quarter of 2013 resulted in decreased unrealized
gains on fixed maturity investments reducing stockholders' equity.
Approximately $0.79 of the decline in adjusted book value per share was
attributable to reduced stockholders' equity and the remaining $0.19 of the
change was attributable to an increase in shares outstanding as the result of
routine exercises of employee equity awards. Under the Company’s long-term
incentive compensation plan, the first options granted are due to expire in
2014. The Company expects officers to be exercising these options prior to
their expiration in August of 2014.

President and Chief Executive Officer Douglas D. Dirks commented on the
results: “We are pleased with the substantial improvements in financial and
operating performance that we achieved in the second quarter of this year
relative to last year. Net income before the LPT increased nearly $10 million
or $0.29 per diluted share. Our underwriting, commission and loss expenses as
a percentage of earned premium all improved relative to the second quarter of
2012, driving a significant improvement of nearly eleven points in our
combined ratio before the LPT."

Dirks continued: "As expected, we lowered our provision rate for losses for
the second time this year, by four points in the three months ended June 30
compared with the same period last year. Pricing improvement continued as the
total change in net rate increased 10.1% year over year. As in the first
quarter of this year, the net rate change at the end of the second quarter in
our top five states, in terms of in-force premium, was positive relative to
the end of last year's second quarter. The change in net rate in the second
quarter was highest in Illinois at 17%, followed by California at 14% and
Nevada at 13%."

Dirks concluded: "We believe that the pricing, targeted growth and cost
containment initiatives we implemented in recent years will continue to be
major drivers of our reported results throughout 2013."

Third Quarter Dividend

The Board of Directors declared a third quarter 2013 dividend of six cents per
share. The dividend is payable on September4, 2013 to stockholders of record
as of August21, 2013.

Conference Call and Web Cast; Form 10-Q; Supplemental Portfolio Listing

The Company will host a conference call on Thursday, August8, 2013, at 8:30
a.m. Pacific Daylight Time. The conference call will be available via a live
web cast on the Company's web site at www.employers.com. An archived version
will be available several hours after the call. The conference call replay
number is (888) 286-8010 with a pass code of 21661548. International callers
may dial (617) 801-6888.

EHI expects to file its Form 10-Q for the quarter ended June30, 2013, with
the Securities and Exchange Commission (“SEC”) on or about Thursday, August8,
2013. The Form 10-Q will be available without charge through the EDGAR system
at the SEC's web site and will also be posted on the Company's website,
www.employers.com, through the “Investors” link.

The Company provides a list of portfolio securities by CUSIP in the Calendar
of Events, Second Quarter “Investors” section of its web site at
www.employers.com.

Discussion of Non-GAAP Financial Measures

This earnings release includes non-GAAP financial measures used to analyze the
Company's operating performance for the periods presented.

These non-GAAP financial measures exclude impacts related to the LPT Agreement
deferred reinsurance gain. The 1999 LPT Agreement was a non-recurring
transaction that does not result in ongoing cash benefits and, consequently,
the Company believes these non-GAAP measures are useful in providing
stockholders and management a meaningful understanding of the Company's
operating performance. In addition, these measures, as defined, are helpful to
management in identifying trends in the Company's performance because the
items excluded have limited significance in current and ongoing operations.

The Company strongly urges stockholders and other interested persons not to
rely on any single financial measure to evaluate its business. The non-GAAP
measures are not a substitute for GAAP measures and investors should be
careful when comparing the Company's non-GAAP financial measures to similarly
titled measures used by other companies.

Net Income before impact of the LPT Agreement. Net income less (a)
amortization of deferred reinsurance gain–LPT Agreement; (b) adjustments to
LPT Agreement ceded reserves; and (c) adjustments to contingent commission
receivable–LPT Agreement.

Deferred reinsurance gain–LPT Agreement (Deferred Gain). This reflects the
unamortized gain from the LPT Agreement. Under GAAP, this gain is deferred and
amortized using the recovery method, whereby the amortization is determined by
the proportion of actual reinsurance recoveries to total estimated recoveries,
except for the contingent profit commission, which is amortized through June
30, 2024. The amortization is reflected in losses and LAE.

Gross Premiums Written. Gross premiums written is the sum of both direct
premiums written and assumed premiums written before the effect of ceded
reinsurance. Direct premiums written represents the premiums on all policies
the Company's insurance subsidiaries have issued during the year. Assumed
premiums written represents the premiums that the insurance subsidiaries have
received from an authorized state-mandated pool.

Net Premiums Written. Net premiums written is the sum of direct premiums
written and assumed premiums written less ceded premiums written. Ceded
premiums written is the portion of direct premiums written that are ceded to
reinsurers under reinsurance contracts. The Company uses net premiums written,
primarily in relation to gross premiums written, to measure the amount of
business retained after cession to reinsurers.

Losses and LAE before impact of the LPT Agreement. Losses and LAE less (a)
amortization of Deferred Gain; (b) adjustments to LPT Agreement ceded
reserves; and (c) adjustments to contingent commission receivable–LPT
Agreement.

Losses and LAE Ratio. The losses and LAE ratio is a measure of underwriting
profitability. Expressed as a percentage, it is the ratio of losses and LAE to
net premiums earned.

Commission Expense Ratio. Commission expense ratio is the ratio (expressed as
a percentage) of commission expense to net premiums earned.

Underwriting and Other Operating Expense Ratio. The underwriting and other
operating expense ratio is the ratio (expressed as a percentage) of
underwriting and other operating expense to net premiums earned.

Combined Ratio. The combined ratio represents a summary percentage of claims
and expenses to net premiums earned. The combined ratio is the sum of the
losses and LAE ratio, the commission expense ratio, and the underwriting and
other operating expense ratio.

Combined Ratio before impacts of the LPT Agreement. Combined ratio before
impacts of LPT is the GAAP combined ratio before (a) amortization of deferred
reinsurance gain–LPT Agreement; (b) adjustments to LPT Agreement ceded
reserves; and (c) adjustments to contingent commission receivable–LPT
Agreement.

Equity including Deferred Gain. Equity including Deferred Gain is total equity
plus the Deferred Gain.

Book value per share. Equity including Deferred Gain divided by number of
shares outstanding.

Net rate. Net rate, defined as total premium in-force divided by total insured
payroll exposure, is a function of a variety of factors, including rate
changes, underwriting risk profiles and pricing, and changes in business mix
related to economic and competitive pressures.

Forward-Looking Statements

In this press release, the Company and its management discuss and make
statements based on currently available information regarding their
intentions, beliefs, current expectations, and projections regarding the
Company's future operations, growth and pricing strategies, and financial and
operating performance, as well as the impact of pricing improvements on the
Company, expectations regarding provision rates for losses, drivers of
combined ratio improvement, and the ongoing results, if any, of pricing,
targeted growth, and cost containment initiatives implemented by the Company.
Certain of these statements may constitute "forward-looking" statements as
that term is defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by the fact that they do not
relate strictly to historical or current facts and are often identified by
words such as "may," "will," "could," "would," "should," "expect," "plan,"
"anticipate," "target," "project," "intend," "believe," "estimate," "predict,"
"potential," "pro forma," "seek," "likely," or "continue," or other comparable
terminology and their negatives. EHI and its management caution investors that
such forward-looking statements are not guarantees of future performance.
Risks and uncertainties are inherent in EHI's future performance. Factors that
could cause the Company's actual results to differ materially from those
indicated by such forward-looking statements include, among other things,
those discussed or identified from time to time in EHI's public filings with
the SEC, including the risks detailed in the Company's Quarterly Reports on
Form 10-Q and the Company's Annual Reports on Form 10-K. Except as required by
applicable securities laws, the Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.

The SEC filings for EHI can be accessed through the “Investors” link on the
Company's website, www.employers.com, or through the SEC's EDGAR Database at
www.sec.gov (EHI EDGAR CIK No. 0001379041).

Copyright © 2013 EMPLOYERS. All rights reserved. EMPLOYERS^® and America's
small business insurance specialist. ^ ® are registered trademarks of
Employers Insurance Company of Nevada. Employers Holdings, Inc. is a holding
company with subsidiaries that are specialty providers of workers'
compensation insurance and services focused on select, small businesses
engaged in low to medium hazard industries. Insurance subsidiaries include
Employers Insurance Company of Nevada, Employers Compensation Insurance
Company, Employers Preferred Insurance Company, and Employers Assurance
Company, all rated A- (Excellent) by A.M. Best Company. Additional information
can be found at: http://www.employers.com.

                 
                 
Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
                 
                     Three Months Ended              Six Months Ended
                         June 30,                          June 30,
(in thousands,
except per share         2013           2012             2013           2012
data)
Revenues                 (unaudited)                       (unaudited)
Gross premiums           $  190,068      $  153,094      $  365,031      $  295,888 
written
Net premiums             $  186,996      $  150,364      $  359,022      $  290,728 
written
Net premiums             $  159,953       $  118,955       $  307,928       $  228,855
earned
Net investment           17,645           18,297           35,050           36,682
income
Realized gains
on investments,          3,866            945              4,660            2,723
net
Other income             144             114             247             195        
Total revenues           181,608          138,311          347,885          268,455
Expenses
Losses and loss
adjustment               112,638          87,809           220,910          168,327
expenses
Commission               20,127           16,621           38,520           30,437
expense
Underwriting and
other operating          32,249           30,316           63,789           63,305
expenses
Interest expense         797             858             1,605           1,760      
Total expenses           165,811          135,604          324,824          263,829
                                                                            
Net income
before income            15,797           2,707            23,061           4,626
taxes
Income tax
expense                  1,209           (2,309     )     983             (6,730     )
(benefit)
Net income               $  14,588       $  5,016        $  22,078       $  11,356  
Less impact of
LPT Agreement:
Amortization of
the Deferred             3,275            3,828            6,580            7,984
Gain related to
losses
Amortization of
the Deferred
Gain related to          406              256              788              525
contingent
commission
Impact of LPT
Contingent               1,024           227             1,299           363        
Commission
Adjustments
Net income
before LPT               $  9,883        $  705          $  13,411       $  2,484   
Agreement
                                                                            
Comprehensive
income
Unrealized gains
(losses) during
the period (net
of tax expense
(benefit) of
$(20,886) and
$2,070 for the
three months
ended June 30,           $  (38,787 )     $  3,844         $  (38,761 )     $  9,888
2013 and 2012,
respectively,
and $(20,870)
and $5,324 for
the
six months ended
June 30, 2013
and 2012,
respectively)
Reclassification
adjustment for
realized gains
in net income
(net of
taxes of $1,353
and $331 for the
three months
ended June 30,           (2,513     )     (614       )     (3,029     )     (1,771     )
2013 and 2012,
respectively,
and $1,631 and
$952 for the six
months ended
June 30, 2013
and 2012,
respectively)
Other
comprehensive            (41,300    )     3,230           (41,790    )     8,117      
income (loss),
net of tax
Total
comprehensive            $  (26,712 )     $  8,246        $  (19,712 )     $  19,473  
income (loss)
                                                                            
Weighted average
shares
outstanding
Basic                    31,079,713       31,537,452       30,997,552       32,093,328
Diluted                  31,641,616       31,685,636       31,515,744       32,242,591
Earnings per
common share
Basic                    $  0.47          $  0.16          $  0.71          $  0.35
Diluted                  0.46             0.16             0.70             0.35
Earnings per
common share
attributable to
the LPT
Agreement
Basic                    $  0.15          $  0.14          $  0.28          $  0.27
Diluted                  0.15             0.14             0.27             0.27
Earnings per
common share
before the LPT
Agreement
Basic                    $  0.32          $  0.02          $  0.43          $  0.08
Diluted                  0.31             0.02             0.43             0.08
                                                                                       
                                                                                       

                                       
                                       
Employers Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
                                       
                                           As of           As of
(in thousands, except share data)              June 30,          December 31,
                                               2013              2012
Assets                                         (unaudited)
Available for sale:
Fixed maturity securities at fair
value (amortized cost $1,989,823 at
June 30,                                       $ 2,070,027       $ 2,024,428
2013 and $1,869,142 at December 31,
2012)
Equity securities at fair value (cost
$85,559 at                                     140,369          125,086     
June 30, 2013 and $81,067 at December
31, 2012)
Total investments                              2,210,396         2,149,514
Cash and cash equivalents                      97,060            140,661
Restricted cash and cash equivalents           4,602             5,353
Accrued investment income                      19,786            19,356
Premiums receivable (less bad debt
allowance of $6,730 at June 30, 2013           285,329           223,011
and $5,957
at December 31, 2012)
Reinsurance recoverable for:
Paid losses                                    9,458             9,467
Unpaid losses                                  801,149           805,386
Deferred policy acquisition costs              45,608            38,852
Deferred income taxes, net                     51,291            26,231
Property and equipment, net                    15,489            14,680
Intangible assets, net                         10,106            10,558
Goodwill                                       36,192            36,192
Contingent commission receivable—LPT           20,948            19,141
Agreement
Other assets                                   10,061           12,937      
Total assets                                   $ 3,617,475      $ 3,511,339 
                                                                 
Liabilities and stockholders’ equity
Claims and policy liabilities:
Unpaid losses and loss adjustment              $ 2,291,261       $ 2,231,540
expenses
Unearned premiums                              317,735          265,149     
Total claims and policy liabilities            2,608,996         2,496,689
Commissions and premium taxes payable          42,611            40,825
Accounts payable and accrued expenses          15,758            19,522
Deferred reinsurance gain—LPT                  274,183           281,043
Agreement
Notes payable                                  112,000           112,000
Other liabilities                              41,987           21,879      
Total liabilities                              3,095,535         2,971,958
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value;
150,000,000 shares authorized;
54,371,465 and
54,144,453 shares issued and                   544               541
30,998,491 and 30,771,479 shares
outstanding at June
30, 2013 and December 31, 2012,
respectively
Additional paid-in capital                     331,977           325,991
Retained earnings                              464,210           445,850
Accumulated other comprehensive                87,759            129,549
income, net
Treasury stock, at cost (23,372,974
shares at June 30, 2013 and December           (362,550    )     (362,550    )
31, 2012)
Total stockholders’ equity                     521,940          539,381     
Total liabilities and stockholders’            $ 3,617,475      $ 3,511,339 
equity
                                                                 
Equity including deferred reinsurance
gain - LPT
Total stockholders’ equity                     $ 521,940         $ 539,381
Deferred reinsurance gain–LPT                  274,183          281,043     
Agreement
Total equity including deferred                $ 796,123        $ 820,424   
reinsurance gain–LPT Agreement (A)
Shares outstanding (B)                         30,998,491        30,771,479
Book value per share (A * 1000) / B            $ 25.68          $ 26.66     
                                                                             
                                                                             

                                            
                                            
Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
                                            
                                                Six Months Ended
                                                    June 30,
(in thousands)                                      2013         2012
Operating activities                                (unaudited)
Net income                                          $ 22,078       $ 11,356
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization                       2,800          2,787
Stock-based compensation                            4,169          2,542
Amortization of premium on investments, net         4,310          3,400
Deferred income tax expense                         (2,558   )     (7,675    )
Realized gains on investments, net                  (4,660   )     (2,723    )
Excess tax benefits from stock-based                (349     )     —
compensation
Other                                               549            449
Change in operating assets and liabilities:
Premiums receivable                                 (63,091  )     (56,776   )
Reinsurance recoverable for paid and unpaid         4,246          21,868
losses
Federal income taxes                                2,848          876
Unpaid losses and loss adjustment expenses          59,721         9,426
Unearned premiums                                   52,586         62,846
Accounts payable, accrued expenses and              15,389         7,166
other liabilities
Deferred reinsurance gain—LPT Agreement             (6,860   )     (8,276    )
Contingent commission receivable—LPT                (1,807   )     (597      )
Agreement
Other                                               (4,179   )     7,306     
Net cash provided by operating activities           85,192         53,975
Investing activities
Purchase of fixed maturities                        (211,889 )     (181,836  )
Purchase of equity securities                       (18,190  )     (23,303   )
Proceeds from sale of fixed maturities              706            34,560
Proceeds from sale of equity securities             18,357         8,451
Proceeds from maturities and redemptions of         86,326         110,160
investments
Proceeds from sale of fixed assets                  139            75
Capital expenditures and other                      (3,206   )     (3,326    )
Restricted cash and cash equivalents                751           (842      )
provided by (used in) investing activities
Net cash used in investing activities               (127,006 )     (56,061   )
Financing activities
Acquisition of treasury stock                       —              (37,322   )
Cash transactions related to stock-based            1,572          (279      )
compensation
Dividends paid to stockholders                      (3,708   )     (3,822    )
Excess tax benefits from stock-based                349           —         
compensation
Net cash used in financing activities               (1,787   )     (41,423   )
Net decrease in cash and cash equivalents           (43,601  )     (43,509   )
Cash and cash equivalents at the beginning          140,661       252,300   
of the period
Cash and cash equivalents at the end of the         $ 97,060      $ 208,791 
period
                                                                             
                                                                             

                  
                      
Employers Holdings, Inc.
Calculation of Combined Ratio before the Impact of the LPT Agreement
                      
                       Three Months Ended            Six Months Ended
                        June 30,                        June 30,
(in thousands,
except for              2013          2012            2013          2012
percentages)
                        (unaudited)
Net premiums            $ 159,953      $ 118,955      $ 307,928      $ 228,855 
earned
                                                                        
Losses and loss
adjustment              112,638        87,809         220,910        168,327   
expenses
Loss & LAE              70.4      %     73.8      %     71.7      %     73.6      %
ratio
                                                                        
Amortization of
Deferred Gain           $ 3,275         $ 3,828         $ 6,580         $ 7,984
related to
losses
Amortization of
Deferred Gain
related to              406             256             788             525
contingent
commission
LPT Contingent
Commission              1,024           227             1,299           363
Adjustments
Impact of LPT           2.9       %     3.6       %     2.8       %     3.9       %
Loss & LAE
before impact           $ 117,343      $ 92,120       $ 229,577      $ 177,199 
of LPT
Loss & LAE
ratio before            73.4      %     77.4      %     74.6      %     77.4      %
impact of LPT
                                                                        
Commission              $ 20,127       $ 16,621       $ 38,520       $ 30,437  
expense
Commission              12.6      %     14.0      %     12.5      %     13.3      %
expense ratio
                                                                        
Underwriting &
other operating         $ 32,249       $ 30,316       $ 63,789       $ 63,305  
expenses
Underwriting &
other operating         20.2      %     25.5      %     20.8      %     27.6      %
expenses ratio
                                                                        
Total expenses          $ 165,014      $ 134,746      $ 323,219      $ 262,069 
Combined ratio          103.2     %     113.3     %     105.0     %     114.5     %
                                                                        
Total expense
before impact           $ 169,719      $ 139,057      $ 331,886      $ 270,941 
of the LPT
Combined ratio
before the              106.1     %     116.9     %     107.8     %     118.4     %
impact of the
LPT
                                                                        
Reconciliations
to Current
Accident Period
Combined Ratio:
Losses & LAE
before impact           $ 117,343       $ 92,120        $ 229,577       $ 177,199
of LPT
Plus: Favorable
(unfavorable)
prior period            (522      )     (529      )     (1,651    )     (1,054    )
reserve
development
Accident period
losses & LAE            $ 116,821      $ 91,591       $ 227,926      $ 176,145 
before impact
of LPT
                                                                        
Losses & LAE
ratio before            73.4      %     77.4      %     74.6      %     77.4      %
impact of LPT
Plus: Favorable
(unfavorable)
prior period            (0.4      )     (0.4      )     (0.6      )     (0.4      )
reserve
development
ratio
Accident period
losses & LAE            73.0      %     77.0      %     74.0      %     77.0      %
ratio before
impact of LPT
                                                                        
Combined ratio
before impact           106.1     %     116.9     %     107.8     %     118.4     %
of the LPT
Plus: Favorable
(unfavorable)
prior period            (0.4      )     (0.4      )     (0.6      )     (0.4      )
reserve
development
ratio
Accident period
combined ratio          105.7     %     116.5     %     107.2     %     118.0     %
before impact
of LPT
                                                                                  
                                                                                  

Contact:

Employers Holdings, Inc.
Media:
Ty Vukelich, 775-327-2677
tvukelich@employers.com
or
Analysts:
Vicki Erickson Mills, 775-327-2794
vericksonmills@employers.com
 
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