RENO, Nev.,/PRNewswire/ —
- Increased fourth quarter net income 25 cents per share or by 78.9% and net income before the LPT 24 cents per share or by 132.6% year over year
- Increased fourth quarter written premium $6.1 million or 8.4% year over year
- Decreased underwriting and other operating expenses 36.5% year over year in the fourth quarter and 23.6% in the full year
- Increased California policy count 5.1% and overall policy count 1% year over year
- Continued positive, but flattening net rate in California in the fourth quarter
- Filed to increase rates in California an additional 2.5% effective March 15, 2011 and received a 7.8% rate increase in the administered pricing state of Florida effective January 1, 2011
- Maintained fair market value of $2.1 billion portfolio with a tax equivalent yield of 5.3% and a pre-tax yield of 4.2%
- Increased book value per share 6.8% to $22.08 since December 31, 2009
- Completed $50 million share repurchase program and authorized a new $100 million share repurchase program through June 2012; total repurchases of $64.4 million in 2010
Employers Holdings, Inc. (“EHI” or the “Company”) (NYSE: EIG) today reported fourth quarter net income of $20.1 million or $0.51 per diluted share compared with $11.3 million or $0.26 per diluted share in the fourth quarter of 2009, an increase of $8.9 million in net income or $0.25 per share. Net income in the fourth quarter of 2010 was driven largely by expense reductions, realized gains from equity sales in the quarter and increased written premium. Written premium was impacted by a $2.8 million favorable adjustment in the final audit accrual rate in the fourth quarter of 2010 relative to the fourth quarter of 2009 and a $1.6 million reinsurance reinstatement premium paid that lowered written premium in the fourth quarter of 2009. In force premium of $321.1 million at December 31, 2010 declined $63.9 million or 16.6% relative to year-end 2009 and just 2.2% since September 30, 2010.
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 $15.4 million or $0.39 per share in the fourth quarter of 2010 and $6.6 million or $0.15 per share in the fourth quarter of 2009.
Net income for the full year of 2010 was $62.8 million or $1.51 per diluted share compared with $83.0 million or $1.80 per diluted share for the full year 2009. Net income before the impact of the LPT deferred reinsurance gain was $44.6 million or $1.07 per diluted share in 2010 compared with $65.0 million or $1.41 per diluted share in 2009.
At December 31, 2010, the Company’s year over year change in net rate was -5% compared with -7% in 2009 while the Company’s year over year change in total payroll exposure was -12% compared with -11% in 2009.
The fourth quarter 2010 combined ratio was 107.6% (113.3% before the impact of the LPT deferred reinsurance gain), compared with 106.5% (111.7% before the impact of the LPT deferred reinsurance gain) for the fourth quarter of 2009, an increase of 1.1 percentage points in the GAAP combined ratio. For the full year of 2010, the combined ratio was 106.8% (112.4% before the impact of the LPT deferred reinsurance gain), an increase of 8.8 percentage points from 98.0% (102.5% before the impact of the LPT deferred reinsurance gain) for the same period in 2009.
President and Chief Executive Officer Douglas D. Dirks commented on the results: “Reflecting on this past year, we are pleased that our growth initiatives, implemented in late July, are beginning to yield results. In the last six months of 2010, we added 1,228 policies, despite the fact that unemployment rates in three of our largest states – California, Florida and Nevada – were at or near their thirty-five year peaks.”
Dirks continued: “Net income before the LPT doubled in the fourth quarter, bolstered by expense reductions and realized gains on the sale of equities. By actively managing our operations, in the fourth quarter of 2010 we have made substantial progress in improving our underwriting and other operating expense ratio of 27.4%, which declined 12.7 percentage points year over year. Our fourth quarter loss ratio increased 14.7 percentage points year over year, with the difference in prior accident year reserve releases – none in the fourth quarter of 2010 compared with $11.8 million in the fourth quarter of 2009 – contributing 14.1 percentage points of the increase. We increased our loss provision rate, to 73.0% compared to 71.5% in the fourth quarter of 2009, to reflect increased severity trends in California. Net rate in California was positive in the fourth quarter and we are raising pure premium rates an additional 2.5% in California effective March 15, 2011. California continues to represent approximately half of our book of business.”
Commenting on the balance sheet, Dirks added: “Book value per share increased 6.8% since December 31, 2009. At the same time, we returned $74.3 million to stockholders through share repurchases and dividends during 2010. Our invested assets of $2.1 billion yielded 5.3% on a tax equivalent basis at December 31, 2010 with a pre-tax net unrealized gain of $129.4 million in 2010. We broadened equity investments slightly, to 3.9% of total invested assets and shifted $20 million of equity securities to a high-yield dividend portfolio. New investments are high quality, large cap equities that combined have a higher dividend rate than the equities previously held. We believe these investments will yield additional income while further diversifying our equity holdings across industries and issuers.”
Looking ahead, Dirks concluded: “While economic recovery may be a lengthy process, there are signs of stability and growth returning to some areas of our geographic footprint. We have scaled our operations in line with our current book of business and continue to invest in the products and services that support our agents, partners and policyholders. In 2011, we will focus on further increasing the numbers of new policies and agents, and deploying our rapid quote capability which is now available in 22 of our 30 states. As we add new agents and policies, we will focus on the retention of our best accounts. In the face of competitive and sometimes irrational pricing, we will not buy new business.”
The full earnings release is available here.