Employers Holdings, Inc. (NYSE:EIG) Q3 2019 Earnings Conference Call October 24, 2019 11:11 AM ET Company Participants Lori Brown - Executive Vice President, General Counsel Doug Dirks - Chief Executive Officer Mike Paquette - Chief Financial Officer Steve Festa - Chief Operating Officer Conference Call Participants Matthew Carletti - JMP Securities Mark Hughes - SunTrust Robinson Humphrey Bob Farnam - Boenning and Scattergood, Inc Ronald Bobman - Capital Returns Operator Ladies and gentlemen, thank you for ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number: 001-33245 EMPLOYERS HOLDINGS, INC. (Exact name of registrant as specified in its charter) Nevada 04-3850065 (State or other jurisd ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number: 001-33245 EMPLOYERS HOLDINGS, INC. (Exact name of registrant as specified in its charter) Nevada 04-3850065 (State or other jurisdictio ...

Employers Holdings, Inc. (NYSE:EIG) Q2 2019 Earnings Conference Call July 25, 2019 11:30 AM ET Company Participants Lori Brown - Executive Vice President, General Counsel Doug Dirks - Chief Executive Officer Mike Paquette - Chief Financial Officer Steve Festa - Chief Operating Officer Conference Call Participants Mark Hughes - SunTrust Matthew Carletti - JMP Securities Amit Kumar - Buckingham Research Bob Farnam - Boenning and Scattergood Operator Good day, ladies and gentlemen, and welcome to the Employers ...

Financial Data and Key Metrics Changes - The company reported a 10.4% annualized return on adjusted equity and more than doubled its net income, with adjusted income growing by 5.5% [6][7] - Book value per share increased by 6.6%, and the combined ratio before the impact of the loss portfolio transfer (LPT) was 91.9% [7][10] - The first quarter loss and LAE ratio before the impact of the LPT was 52.1%, which is 3.4 percentage points lower than the previous year [10] Business Line Data and Key Metrics Changes - Net written premiums for the quarter were $209 million, down $1.4 million or 0.7% from the first quarter of 2018, primarily due to a reduction in final audit premium [14] - New business-bound policies increased by 19.1% year-over-year, but new business premium decreased by $800,000 or 1.3% over the prior quarter [15] - Renewal premium growth was 9.3% or $12 million, with policy unit retention rates increasing from 93% to 95.2% year-over-year [16] Market Data and Key Metrics Changes - The average renewal rate declined by 11.6%, compared to a 9.5% decline in the same period a year ago, indicating competitive pressures in the middle market business [7][8] - The company experienced a 22% increase in payroll exposure year-over-year, despite a 3.4% decrease in average in-force policy size [17] Company Strategy and Development Direction - The company is focusing on digital solutions based on data, analytics, and technology to create a sustainable competitive advantage [18] - The strategy around small low hazard accounts is aimed at less competition and higher persistency, which continues to be effective [18] Management's Comments on Operating Environment and Future Outlook - Management noted that the underlying loss environment for workers' compensation remains attractive, supporting continued growth [9] - There is an expectation that the declining loss cost trends may be moderating, particularly in California, which could impact pricing strategies [32][33] Other Important Information - The company repurchased $27.4 million of common stock during the quarter, with an additional $10.4 million repurchased since quarter-end [13] - The Board of Directors increased the share repurchase authorization by $50 million, bringing the remaining authority to $57.5 million [13] Q&A Session Summary Question: Momentum in submissions and quotes - Management indicated that the trend of increasing submissions and quotes has continued into the first quarter, with expectations for further impact from ongoing initiatives [20] Question: Loss pick and mix - Management acknowledged that loss trends are rising faster than premiums in certain areas, but this is not consistent across the country [21] Question: Share repurchase sustainability - Management expressed optimism about the sustainability of share repurchases, noting that they are now in a position to be opportunistic [22][24] Question: Progress on Cerity - Early observations on Cerity have been positive, with expectations for rapid growth dependent on regulatory approvals [25][26] Question: Technology initiatives and expense ratio - Management confirmed that the expense ratio is expected to remain about 4 points higher than last year, consistent throughout the year [28][29] Question: Pricing outlook - Management noted that while loss costs are still declining, there may be signs of moderation, particularly in California, which could affect pricing strategies [31][32] Question: Reserve releases - The reserve releases were predominantly from accident years 2014 through 2017 [34] Question: Partner reacquisition update - Management remains optimistic about receiving clearance for the partner reacquisition soon [35]

PART I – FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls for the reporting period [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, statements of comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, fair value measurements, investments, and other financial disclosures for the periods ended March 31, 2019, and December 31, 2018 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202019%20%28Unaudited%29%20and%20December%2031%2C%202018) This section presents the Company's financial position, detailing assets, investments, liabilities, and equity as of March 31, 2019, and December 31, 2018 | Metric | March 31, 2019 (in millions) | December 31, 2018 (in millions) | | :----------------------------------- | :--------------------------- | :---------------------------- | | Total Assets | $3,973.1 | $3,919.2 | | Total Investments | $2,757.4 | $2,727.7 | | Unpaid Losses and Loss Adjustment Expenses | $2,189.3 | $2,207.9 | | Total Liabilities | $2,901.4 | $2,901.0 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202019%20and%202018%20%28Unaudited%29) This section details the Company's financial performance, including revenues, expenses, net income, and comprehensive income for the three months ended March 31, 2019 and 2018 | Metric | Three Months Ended March 31, 2019 (in millions) | Three Months Ended March 31, 2018 (in millions) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Premiums Earned | $174.8 | $176.6 | | Net Investment Income | $21.8 | $19.4 | | Net Realized and Unrealized Gains (Losses) on Investments | $23.3 | $(8.0) | | Total Revenues | $220.3 | $188.0 | | Total Expenses | $158.5 | $158.6 | | Net Income Before Income Taxes | $61.8 | $29.4 | | Income Tax Expense | $10.0 | $3.8 | | Net Income | $51.8 | $25.6 | | Total Comprehensive Income (Loss) | $89.1 | $(9.8) | | Basic Earnings Per Common Share | $1.60 | $0.78 | | Diluted Earnings Per Common Share | $1.57 | $0.77 | | Cash Dividends Declared Per Common Share | $0.22 | $0.20 | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202019%20and%202018%20%28Unaudited%29) This section outlines changes in stockholders' equity, including net income, stock acquisitions, dividends, and unrealized investment gains for the three months ended March 31, 2019 and 2018 | Metric | March 31, 2019 (in millions) | January 1, 2019 (in millions) | | :----------------------------------- | :--------------------------- | :---------------------------- | | Balance, Stockholders' Equity | $1,071.7 | $1,018.2 | | Net Income for the Period | $51.8 | N/A | | Acquisition of Common Stock | $(27.5) | N/A | | Dividends Declared | $(7.4) | N/A | | Change in Net Unrealized Gains on Investments, Net of Taxes | $37.3 | N/A | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202019%20and%202018%20%28Unaudited%29) This section presents the Company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2019 and 2018 | Cash Flow Activity | Three Months Ended March 31, 2019 (in millions) | Three Months Ended March 31, 2018 (in millions) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Cash Provided by Operating Activities | $20.1 | $46.2 | | Net Cash Provided by (Used in) Investing Activities | $9.9 | $(53.7) | | Net Cash Used in Financing Activities | $(37.2) | $(9.6) | | Net Decrease in Cash, Cash Equivalents and Restricted Cash | $(7.2) | $(17.1) | | Cash, Cash Equivalents and Restricted Cash at End of Period | $94.8 | $57.2 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section provides detailed explanations of the accounting policies, fair value measurements, investments, and other financial disclosures supporting the consolidated financial statements [1. Basis of Presentation and Summary of Operations](index=10&type=section&id=1.%20Basis%20of%20Presentation%20and%20Summary%20of%20Operations) This section describes the Company's operational segment and the basis for preparing the financial statements, including details on a pending acquisition - The Company operates as a single segment, specializing in workers' compensation insurance through its wholly owned subsidiaries[28](index=28&type=chunk) - A pending acquisition of PartnerRe Insurance Company of New York (PRNY) is expected to be funded with cash on hand, with PRUS indemnifying all PRNY liabilities[30](index=30&type=chunk)[31](index=31&type=chunk) [2. New Accounting Standards](index=11&type=section&id=2.%20New%20Accounting%20Standards) This section discusses the adoption of new accounting standards and their impact on the Company's financial statements, including ASU 2016-02 and ongoing evaluations - The adoption of ASU Number 2016-02 (Leases) resulted in the recognition of **$16.8 million** in Operating lease right-of-use assets and **$19.0 million** in Lease liabilities on the Consolidated Balance Sheet as of March 31, 2019[42](index=42&type=chunk) - Most recently issued ASUs (2019-01, 2018-13, 2017-04) are not expected to have a material impact on the Company's financial condition or results of operations[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - The Company is currently evaluating the impact of ASU Number 2016-13 (Financial Instruments - Credit Losses)[37](index=37&type=chunk) [3. Fair Value of Financial Instruments](index=12&type=section&id=3.%20Fair%20Value%20of%20Financial%20Instruments) This section details the fair value measurements of financial instruments, including investments and notes payable, categorized by valuation input levels | Financial Instrument | March 31, 2019 (in millions) | December 31, 2018 (in millions) | | :----------------------------------- | :--------------------------- | :---------------------------- | | Total Investments at Fair Value | $2,751.0 | $2,721.3 | | Notes Payable (Fair Value) | $25.6 | $23.5 | - Fixed maturity securities are primarily valued using Level 2 inputs, while equity securities at fair value are primarily Level 1[51](index=51&type=chunk) [4. Investments](index=15&type=section&id=4.%20Investments) This section provides a breakdown of the Company's investment portfolio, including available-for-sale securities and equity securities, and discusses investment income and impairments | Investment Type | March 31, 2019 (Fair Value, in millions) | December 31, 2018 (Fair Value, in millions) | | :----------------------------------- | :--------------------------------------- | :---------------------------------------- | | Total AFS Investments | $2,521.0 | $2,521.4 | | Total Equity Securities at Fair Value | $230.0 | $199.9 | - Net investment income increased to **$21.8 million** for Q1 2019 from **$19.4 million** for Q1 2018[67](index=67&type=chunk) - No other-than-temporary impairments on fixed maturity securities were recognized during the three months ended March 31, 2019[60](index=60&type=chunk) [5. Property and Equipment](index=20&type=section&id=5.%20Property%20and%20Equipment) This section details the Company's property and equipment, net of depreciation, and capitalized cloud computing arrangements, along with lease expenses | Metric | March 31, 2019 (in millions) | December 31, 2018 (in millions) | | :----------------------------------- | :--------------------------- | :---------------------------- | | Property and Equipment, Net | $21.8 | $18.2 | | Capitalized Cloud Computing Arrangements | $25.1 | $26.0 | - Total lease expense for the three months ended March 31, 2019, was **$1.4 million**, comprising **$1.3 million** operating lease expense and **$0.1 million** finance lease expense[74](index=74&type=chunk) [6. Income Taxes](index=21&type=section&id=6.%20Income%20Taxes) This section presents the Company's income tax expense and effective tax rates for the three months ended March 31, 2019 and 2018 | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Income Tax Expense | $10.0 million | $3.8 million | | Effective Tax Rate | 16.2% | 12.9% | [7. Liability for Unpaid Losses and Loss Adjustment Expenses](index=22&type=section&id=7.%20Liability%20for%20Unpaid%20Losses%20and%20Loss%20Adjustment%20Expenses) This section details the Company's reserves for unpaid losses and loss adjustment expenses, including net amounts and favorable prior period development | Metric | March 31, 2019 (in millions) | March 31, 2018 (in millions) | | :----------------------------------- | :--------------------------- | :--------------------------- | | Unpaid Losses and LAE at End of Period | $2,189.3 | $2,258.1 | | Net Unpaid Losses and LAE at End of Period | $1,690.6 | $1,727.0 | | Favorable Prior Periods Development | $22.2 | $12.4 | [8. LPT Agreement](index=22&type=section&id=8.%20LPT%20Agreement) This section outlines the remaining deferred gain and estimated liabilities subject to the Loss Portfolio Transfer (LPT) Agreement, including amortization details | Metric | March 31, 2019 (in millions) | December 31, 2018 (in millions) | | :----------------------------------- | :--------------------------- | :---------------------------- | | Remaining Deferred Gain | $147.1 | $149.6 | | Estimated Remaining Liabilities Subject to LPT Agreement | $402.3 | $408.2 | - The Company amortized **$2.5 million** under the LPT Agreement for the three months ended March 31, 2019[84](index=84&type=chunk) [9. Notes Payable and Other Financing Arrangements](index=23&type=section&id=9.%20Notes%20Payable%20and%20Other%20Financing%20Arrangements) This section details the Company's notes payable and other financing arrangements, including surplus notes and standby letter of credit agreements | Note Type | March 31, 2019 (in millions) | December 31, 2018 (in millions) | | :----------------------------------- | :--------------------------- | :---------------------------- | | Dekania Surplus Note | $10.0 | $10.0 | | Alesco Surplus Note | $10.0 | $10.0 | | Total Notes Payable | $20.0 | $20.0 | - Standby Letter of Credit Reimbursement Agreements with FHLB were amended to increase credit amounts, totaling **$260.0 million** issued as of March 31, 2019[89](index=89&type=chunk) [10. Accumulated Other Comprehensive Income](index=23&type=section&id=10.%20Accumulated%20Other%20Comprehensive%20Income) This section presents the components of accumulated other comprehensive income, including unrealized gains/losses on investments and deferred tax impacts | Metric | March 31, 2019 (in millions) | December 31, 2018 (in millions) | | :----------------------------------- | :--------------------------- | :---------------------------- | | Net Unrealized Gains (Losses) on Investments, Before Taxes | $29.9 | $(17.3) | | Deferred Tax (Expense) Benefit | $(6.3) | $3.6 | | Total Accumulated Other Comprehensive Income (Loss) | $23.6 | $(13.7) | [11. Stock-Based Compensation](index=24&type=section&id=11.%20Stock-Based%20Compensation) This section details the Company's stock-based compensation awards, including restricted stock units, performance share units, and stock option exercises | Award Type | Number Awarded (March 2019) | Aggregate Fair Value (in millions) | | :----------------------------------- | :-------------------------- | :------------------------------- | | Restricted Stock Units (RSUs) | 72,060 | $2.9 | | Performance Share Units (PSUs) | 95,940 | $3.9 | - Stock options exercised totaled **1,300** for the three months ended March 31, 2019, compared to **275** for the same period in 2018[97](index=97&type=chunk) [12. Earnings Per Share](index=24&type=section&id=12.%20Earnings%20Per%20Share) This section provides the calculation of basic and diluted earnings per common share, including net income and weighted average shares outstanding | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net Income—Basic and Diluted | $51.8 million | $25.6 million | | Weighted Average Shares Outstanding—Basic | 32,442,287 | 32,830,481 | | Dilutive Potential Shares | 511,792 | 489,939 | [13. Subsequent Events](index=25&type=section&id=13.%20Subsequent%20Events) This section discloses significant events occurring after the balance sheet date, specifically the approval and payment of a surplus note - The Florida Office of Insurance Regulation approved EPIC's request to pay off the Dekania surplus note, which was formally called for payment of **$10.2 million** effective May 15, 2019[102](index=102&type=chunk) [Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Consolidated%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, highlighting key operational strategies, market dynamics, and financial results. It covers revenue drivers, expense trends, liquidity, capital resources, and critical accounting estimates, emphasizing the Company's focus on profitable growth in workers' compensation insurance for small businesses and strategic investments in technology [Overview](index=26&type=section&id=Overview) This section provides an overview of the Company's business, market concentration, strategic initiatives, and pricing trends in workers' compensation insurance - The Company provides workers' compensation insurance in **45 states and D.C.**, with a concentration in California (over half of business)[107](index=107&type=chunk) - Strategic initiatives include disciplined underwriting, claims management, strong agency relationships, and development of new technologies like Cerity for digital, direct-to-customer solutions[109](index=109&type=chunk) - Pricing on renewals showed an overall decrease of **11.6%** for the three months ended March 31, 2019, year-over-year[111](index=111&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section details the Company's financial performance, including net income, underwriting income, and the impact of loss development and investment gains | Metric | Three Months Ended March 31, 2019 (in millions) | Three Months Ended March 31, 2018 (in millions) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Income | $51.8 | $25.6 | | Underwriting Income | $16.7 | $18.3 | | Net Income Before Impact of the LPT Agreement | $49.3 | $23.0 | - Q1 2019 net income was significantly impacted by **$22.2 million** in favorable prior accident year loss development and **$21.2 million** in net unrealized gains on equity securities[119](index=119&type=chunk) [Gross Premiums Written](index=28&type=section&id=Gross%20Premiums%20Written) This section details the Company's gross premiums written, highlighting the year-over-year decrease primarily due to final audit premiums | Metric | Three Months Ended March 31, 2019 (in millions) | Three Months Ended March 31, 2018 (in millions) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Gross Premiums Written | $210.0 | $211.6 | - The year-over-year decrease was primarily due to a decrease in final audit premiums[124](index=124&type=chunk) [Net Premiums Written](index=28&type=section&id=Net%20Premiums%20Written) This section presents the Company's net premiums written for the three months ended March 31, 2019 and 2018 | Metric | Three Months Ended March 31, 2019 (in millions) | Three Months Ended March 31, 2018 (in millions) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Premiums Written | $208.7 | $210.1 | [Net Premiums Earned](index=28&type=section&id=Net%20Premiums%20Earned) This section details the Company's net premiums earned for the three months ended March 31, 2019 and 2018 | Metric | Three Months Ended March 31, 2019 (in millions) | Three Months Ended March 31, 2018 (in millions) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Premiums Earned | $174.8 | $176.6 | [In-force Premiums and Policy Count](index=30&type=section&id=In-force%20Premiums%20and%20Policy%20Count) This section analyzes changes in in-force premiums, policy count, average policy size, and payroll exposure, including alternative distribution channels | Metric | Overall YoY Change | California YoY Change | All Other States YoY Change | | :----------------------------------- | :----------------- | :-------------------- | :-------------------------- | | In-force Premiums | +4.7% | -0.2% | +10.6% | | In-force Policy Count | +8.3% | +6.3% | +10.1% | | Average In-force Policy Size | -3.4% | -6.1% | +0.4% | | In-force Payroll Exposure | +22.0% | +24.4% | +20.6% | - Alternative distribution channels generated **23.7%** of in-force premiums as of March 31, 2019, up from **23.4%** in the prior year[128](index=128&type=chunk) [Net Investment Income and Net Realized and Unrealized Gains on Investments](index=30&type=section&id=Net%20Investment%20Income%20and%20Net%20Realized%20and%20Unrealized%20Gains%20on%20Investments) This section details net investment income and realized/unrealized gains/losses on investments, including changes in pre-tax book yield and equity security performance - Net investment income increased by **12.4%** year-over-year, with the average pre-tax book yield on invested assets rising to **3.4%** as of March 31, 2019, from **3.1%** a year prior[130](index=130&type=chunk) | Metric | Three Months Ended March 31, 2019 (in millions) | Three Months Ended March 31, 2018 (in millions) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Realized and Unrealized Gains (Losses) on Investments | $23.3 | $(8.0) | | Unrealized Gains (Losses) on Equity Securities | $21.2 (gains) | $(12.9) (losses) | | Net Realized Gains on Investments | $2.1 (gains) | $4.9 (gains) | | Other-than-Temporary Impairments | $0 | $2.0 (losses) | [Losses and LAE, Commission Expenses, and Underwriting and Other Operating Expenses](index=32&type=section&id=Losses%20and%20LAE%2C%20Commission%20Expenses%2C%20and%20Underwriting%20and%20Other%20Operating%20Expenses) This section analyzes key expense ratios, including loss and LAE, underwriting and other operating expenses, and commission expenses, and their drivers | Ratio | March 31, 2019 | March 31, 2018 | | :----------------------------------- | :------------- | :------------- | | Combined Ratio | 90.4% | 89.6% | | Loss and LAE Ratio | 50.7% | 54.0% | | Underwriting and Other Operating Expenses Ratio | 27.1% | 22.2% | | Commission Expense Ratio | 12.6% | 13.4% | [Loss and LAE Ratio](index=32&type=section&id=Loss%20and%20LAE%20Ratio) This section details the loss and LAE ratio, attributing changes to favorable prior accident year development and current year competitive pressures - The loss and LAE ratio decreased by **3.3 percentage points**, primarily due to increased favorable prior accident year loss development of **$22.2 million** in Q1 2019 (vs. **$12.4 million** in Q1 2018)[140](index=140&type=chunk) - The current accident year loss and LAE ratio increased to **64.8%** in Q1 2019 from **62.5%** in Q1 2018, mainly due to competitive pressures and price decreases[141](index=141&type=chunk) [Underwriting and Other Operating Expenses Ratio](index=33&type=section&id=Underwriting%20and%20Other%20Operating%20Expenses%20Ratio) This section analyzes the increase in the underwriting and other operating expenses ratio, driven by higher compensation, professional fees, taxes, and bad debt - The underwriting and other operating expenses ratio increased by **4.9 percentage points**, driven by higher compensation-related expenses (+$2.3M), professional fees (+$1.7M), premium taxes (+$0.9M), and bad debt expense (+$1.7M), largely due to investments in digital technologies[147](index=147&type=chunk) [Commission Expense Ratio](index=33&type=section&id=Commission%20Expense%20Ratio) This section details the decrease in the commission expense ratio, primarily due to lower projected agency incentive commissions - The commission expense ratio decreased by **0.8 percentage points**, primarily due to a decrease in projected 2019 agency incentive commissions[149](index=149&type=chunk) [Income Tax Expense](index=33&type=section&id=Income%20Tax%20Expense) This section presents the Company's income tax expense and effective tax rates for the three months ended March 31, 2019 and 2018 | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Income Tax Expense | $10.0 million | $3.8 million | | Effective Tax Rate | 16.2% | 12.9% | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's liquidity position, capital resources, and cash flow activities, including holding company and operating subsidiary liquidity, dividends, and share repurchases [Holding Company Liquidity](index=33&type=section&id=Holding%20Company%20Liquidity) This section details the cash and investments held at the holding company level and the dividend capacity from insurance subsidiaries - Total cash and investments at the holding company was **$124.1 million** at March 31, 2019[154](index=154&type=chunk) - Dividend capacity from insurance subsidiaries varies, with EICN having **$0.1 million** remaining for 2019 without prior regulatory approval after a **$19.7 million** payment[152](index=152&type=chunk) [Operating Subsidiaries' Liquidity](index=34&type=section&id=Operating%20Subsidiaries%27%20Liquidity) This section outlines the cash and investments held by operating subsidiaries, including immediate liquidity and FHLB Letter of Credit arrangements - Total cash and investments held by operating subsidiaries was **$2,728.1 million** at March 31, 2019[156](index=156&type=chunk) - Immediate and unencumbered liquidity included **$45.7 million** cash, **$178.8 million** publicly traded equity, and **$1,017.5 million** highly liquid fixed maturity securities[156](index=156&type=chunk) - FHLB Letter of Credit Agreements were amended to increase credit amounts, with **$260.0 million** issued as of March 31, 2019, for state insurance deposit requirements[158](index=158&type=chunk) [Sources of Liquidity](index=34&type=section&id=Sources%20of%20Liquidity) This section presents the Company's cash flow activities from operations, investing, and financing, showing the net decrease in cash | Cash Flow Activity | Three Months Ended March 31, 2019 (in millions) | Three Months Ended March 31, 2018 (in millions) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Operating Activities | $20.1 | $46.2 | | Investing Activities | $9.9 | $(53.7) | | Financing Activities | $(37.2) | $(9.6) | | Decrease in Cash, Cash Equivalents, and Restricted Cash | $(7.2) | $(17.1) | [Dividends](index=36&type=section&id=Dividends) This section details stockholder dividends paid and declared, including the per-share amount for the reporting period | Metric | Three Months Ended March 31, 2019 (in millions) | Three Months Ended March 31, 2018 (in millions) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Stockholder Dividends Paid | $7.3 | $6.6 | - A **$0.22** dividend per share was declared on April 24, 2019, payable May 22, 2019[172](index=172&type=chunk) [Share Repurchases](index=36&type=section&id=Share%20Repurchases) This section outlines the Company's share repurchase program, including its expansion, extension, and shares repurchased during the period - The 2018 share repurchase program was expanded by **$50 million** to **$100 million** and extended through June 30, 2020[173](index=173&type=chunk) - Through March 31, 2019, **783,365 shares** were repurchased for a total cost of **$32.0 million** at an average price of **$40.90** per share[173](index=173&type=chunk) [Capital Resources](index=36&type=section&id=Capital%20Resources) This section summarizes the Company's capital resources, including stockholders' equity, deferred gain, and surplus notes | Capital Resource | March 31, 2019 (in millions) | | :----------------------------------- | :--------------------------- | | Stockholders' Equity | $1,071.7 | | Deferred Gain | $147.1 | | Surplus Notes | $20.0 | [Contractual Obligations and Commitments](index=37&type=section&id=Contractual%20Obligations%20and%20Commitments) This section lists the Company's contractual obligations and commitments, including operating leases, notes payable, and unpaid losses and LAE reserves | Obligation Type | Total (in millions) | | :----------------------------------- | :------------------ | | Operating Leases | $21.2 | | Non-cancellable Contracts | $17.4 | | Notes Payable | $41.3 | | Capital Leases | $0.8 | | Unpaid Losses and LAE Reserves | $2,189.3 | | Unfunded Investments | $50.0 | | Total Contractual Obligations | $2,320.0 | - Reinsurance recoverables on unpaid losses and LAE totaled **$(498.7) million**[179](index=179&type=chunk) [Investments](index=37&type=section&id=Investments) This section describes the composition and quality of the Company's investment portfolio, including fixed maturity and equity securities, yields, and impairments - The investment portfolio consists of **92%** fixed maturity securities and **8%** equity securities, with a weighted average quality of 'AA-' for fixed maturity securities and a duration of **3.9** at March 31, 2019[182](index=182&type=chunk)[183](index=183&type=chunk) | Metric | March 31, 2019 | | :----------------------------------- | :------------- | | Total Amortized Cost of Investments at Fair Value | $2,631.9 million | | Fair Value of Investments | $2,751.0 million | | Average Book Yield | 3.4% | | Average Tax Equivalent Yield | 3.6% | - No impairments on fixed maturity securities were recognized during the three months ended March 31, 2019[188](index=188&type=chunk) [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements for the Company - The Company has no off-balance sheet arrangements[189](index=189&type=chunk) [Critical Accounting Policies](index=39&type=section&id=Critical%20Accounting%20Policies) This section highlights the critical accounting policies involving significant management estimates and judgments, such as reserves and investment valuation - Critical accounting policies involve significant management estimates and judgments related to reserves for losses and LAE, reinsurance recoverables, recognition of premium income, deferred income taxes, and valuation of investments[190](index=190&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the Company's exposure to market risks, primarily credit risk, interest rate risk, and equity price risk. It highlights that interest rate risk is the main exposure for the investment portfolio, managed by duration, and confirms no material changes in market risk since the last annual report - Major components of market risk include credit risk, interest rate risk, and equity price risk[193](index=193&type=chunk) - The primary market risk exposure to the investment portfolio is interest rate risk, with fixed maturity securities having a duration of **3.9** at March 31, 2019[194](index=194&type=chunk) - No material changes in market risk have occurred since December 31, 2018[193](index=193&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period. No material changes to internal control over financial reporting occurred during the period - Disclosure controls and procedures were evaluated and deemed effective as of the end of the reporting period[195](index=195&type=chunk) - There have been no material changes in internal control over financial reporting during the period[196](index=196&type=chunk) PART II – OTHER INFORMATION This section details legal proceedings, risk factors, equity sales, and other miscellaneous information relevant to the Company's operations and disclosures [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in routine legal proceedings, but management does not anticipate that the ultimate liability from such litigation will have a material adverse effect on its financial position, results of operations, or liquidity - Management does not expect the ultimate liability from pending or threatened litigation to materially affect results of operations, liquidity, or financial position[201](index=201&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) The Company confirms that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K as of the date of this quarterly report - No material changes to the risk factors contained in the Annual Report have occurred as of the date of this report[202](index=202&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's common stock repurchases during the first quarter of 2019 under its share repurchase program, which was recently expanded and extended | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in millions) | | :----------------------------------- | :------------------------------- | :--------------------------- | :--------------------------------------------------------------------------------------- | | January 1 – January 31, 2019 | 50,772 | $41.69 | $43.3 | | February 1 – February 28, 2019 | — | — | $43.3 | | March 1 – March 31, 2019 | 620,065 | $40.83 | $18.0 | | Total (Q1 2019) | 670,837 | $40.90 | N/A | - The 2018 share repurchase program was expanded by **$50 million** to **$100 million** and extended through June 30, 2020[204](index=204&type=chunk) [Item 3. Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reports that there have been no defaults upon senior securities during the period - None[205](index=205&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company's operations - Not applicable[206](index=206&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) The Company has no other information to report under this item - None[207](index=207&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including amendments to irrevocable letters of credit and various certifications - Exhibits include amendments to irrevocable letters of credit (10.1, 10.2, 10.3) and certifications (31.1, 31.2, 32.1, 32.2)[209](index=209&type=chunk) [Signatures](index=44&type=section&id=Signatures) The report is duly signed on behalf of Employers Holdings, Inc. by Michael S. Paquette, Executive Vice President and Chief Financial Officer - The report was signed by Michael S. Paquette, Executive Vice President and Chief Financial Officer, on April 25, 2019[214](index=214&type=chunk)

[FORM 10-K Filing Information](index=1&type=section&id=FORM%2010-K) This section details key administrative information for the FORM 10-K filing, including registrant, fiscal year, and stock details - Registrant: **EMPLOYERS HOLDINGS, INC.**[2](index=2&type=chunk) - Fiscal Year Ended: **December 31, 2018**[2](index=2&type=chunk) - Filer Status: **Large accelerated filer**[2](index=2&type=chunk) Key Filing Details | Metric | Value | | :--- | :--- | | Commission File Number | 001-33245 | | Securities Registered (NYSE) | Common Stock, $0.01 par value per share | | Non-Affiliate Common Equity Market Value (as of June 30, 2018) | $1,109,698,729 | | Shares Outstanding (as of Feb 14, 2019) | 32,829,863 | [Forward-Looking Statements](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines the nature, protection, and disclosure obligations for forward-looking statements - Forward-looking statements are protected by the Private Securities Litigation Reform Act of 1995[12](index=12&type=chunk) - Key topics include expected financial position, business, financing plans, litigation, future premiums, revenues, earnings, pricing, investments, business relationships, expected losses, loss reserves, acquisitions, competition, interest rates, and key business initiatives[12](index=12&type=chunk) - The company undertakes no obligation to update or revise forward-looking statements, except as required by law, and highlights risks and uncertainties detailed in Item 1A[13](index=13&type=chunk) [Note Regarding Reliance on Statements in Our Contracts](index=3&type=section&id=NOTE%20REGARDING%20RELIANCE%20ON%20STATEMENTS%20IN%20OUR%20CONTRACTS) This section clarifies that contractual representations are for parties' benefit, not categorical facts for investors - Representations and warranties in agreements are for the benefit of the parties, not categorical statements of fact for investors[15](index=15&type=chunk) - They may be qualified by disclosures, use different materiality standards, and are made only as of the agreement date[15](index=15&type=chunk) - The company acknowledges responsibility for additional disclosures to prevent misleading statements in the report[16](index=16&type=chunk) PART I [Item 1. Business Overview](index=4&type=section&id=Item%201%20Business) EHI is a Nevada holding company providing workers' compensation insurance to small businesses, emphasizing disciplined underwriting and capital returns - EHI is a Nevada holding company specializing in workers' compensation insurance through its subsidiaries (EICN, ECIC, EPIC, EAC)[19](index=19&type=chunk) - The company had **704** full-time employees at December 31, 2018, and its insurance subsidiaries hold an A.M. Best rating of **'A-' (Excellent)** with a **'positive'** outlook[19](index=19&type=chunk) - The business strategy focuses on profitable growth through disciplined underwriting, claims management, medical provider networks, strong agency relationships, new technologies, and diversified risk exposure[24](index=24&type=chunk)[26](index=26&type=chunk) Key Financial Highlights (2016-2018) | Metric | 2018 (in millions) | 2017 (in millions) | 2016 (in millions) | | :--- | :--- | :--- | :--- | | Net premiums written | $742.8 | $723.7 | $694.6 | | Total revenues | $800.4 | $801.4 | $779.8 | | Net income | $141.3 | $101.2 | $106.7 | | Combined ratio | 86.1% | 90.5% | 91.8% | | Combined ratio before LPT Agreement impact | 88.1% | 92.1% | 94.1% | - The company operates in **44 states and D.C.**, with over half of its business generated in California[29](index=29&type=chunk) - Capital strategy includes maintaining strong capital levels for desired ratings, regulatory compliance, financial flexibility, and returning capital to stockholders via dividends and share repurchases[27](index=27&type=chunk)[28](index=28&type=chunk) Dividends Paid and Stock Repurchases (2016-2018) | Year | Dividends Paid (in millions) | Stock Repurchases (in millions) | | :--- | :--- | :--- | | 2018 | $26.7 | $25.7 (3-year period) | | 2017 | $19.7 | | | 2016 | $11.5 | | - The company launched Cerity Services, Inc. in January 2019, a direct-to-customer digital platform for workers' compensation insurance, initially in Illinois[98](index=98&type=chunk) In-force Premiums by Hazard Group (as of Dec 31) | Hazard Group | 2018 (in millions) | % of 2018 Total | 2017 (in millions) | % of 2017 Total | 2016 (in millions) | % of 2016 Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | A | $189.5 | 28.4% | $176.9 | 28.2% | $162.6 | 26.3% | | B | $171.6 | 25.8% | $159.4 | 25.4% | $161.0 | 26.0% | | C | $188.7 | 28.3% | $188.0 | 30.0% | $195.7 | 31.7% | | D | $100.5 | 15.1% | $91.9 | 14.7% | $88.0 | 14.2% | | E | $12.2 | 1.8% | $9.4 | 1.5% | $9.8 | 1.6% | | F | $3.2 | 0.5% | $1.0 | 0.2% | $1.3 | 0.2% | | G | $0.5 | 0.1% | $0.3 | <0.1% | $0.2 | <0.1% | | Total | $666.2 | 100.0% | $626.9 | 100.0% | $618.6 | 100.0% | In-force Premiums and Policies by State (as of Dec 31) | State | 2018 In-force Premiums (in millions) | 2018 Policies In-force | 2017 In-force Premiums (in millions) | 2017 Policies In-force | 2016 In-force Premiums (in millions) | 2016 Policies In-force | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | California | $357.1 | 41,988 | $349.4 | 40,573 | $348.3 | 42,120 | | Florida | $41.0 | 5,833 | $41.8 | 5,625 | $35.2 | 5,263 | | Other (42 states and D.C.) | $268.1 | 43,677 | $235.7 | 39,296 | $235.1 | 37,439 | | Total | $666.2 | 91,498 | $626.9 | 85,494 | $618.6 | 84,822 | - Total in-force premiums increased **7.7%** and policy count increased **7.9%** from 2016 to 2018, with California premiums increasing **2.5%** and policy count decreasing **0.3%** in the same period, reflecting diversification efforts[58](index=58&type=chunk) - Pricing on renewals showed an overall decrease of **11.8%** for 2018, attributed to favorable loss costs and frequency trends, and accelerated claims initiatives[61](index=61&type=chunk) - The company utilizes excess of loss reinsurance to protect against large individual and catastrophic losses, with current coverage of **$190.0 million** in excess of a **$10.0 million** retention[64](index=64&type=chunk)[67](index=67&type=chunk) - The LPT Agreement, assumed in 2000, covers pre-July 1995 claims, with estimated remaining liabilities of **$408.2 million** at December 31, 2018, secured by **$311.6 million** in trust assets[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - Investment portfolio is structured for optimal risk-adjusted return, liquidity, financial strength, and regulatory compliance, with **92%** in fixed maturity securities and a weighted average quality of **'AA-'** at December 31, 2018[87](index=87&type=chunk)[325](index=325&type=chunk) - Distribution channels include independent agents (**76.7%** of in-force premiums in 2018), alternative channels like ADP (**13.1%** of in-force premiums in 2018), and direct-to-customer via Cerity Services[92](index=92&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[98](index=98&type=chunk) - The insurance industry is highly competitive, with competition based on price and service quality, and many competitors are larger and multi-line carriers[99](index=99&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - The company is subject to extensive state insurance regulation, including solvency standards, investment restrictions, rate approvals, and dividend limitations[101](index=101&type=chunk)[104](index=104&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A%20Risk%20Factors) The company faces multiple risks including uncertain loss estimates, regulatory changes, market concentration, and investment volatility - Liability for losses and LAE is based on inherently uncertain estimates, and actual losses may exceed reserves, impacting financial results[120](index=120&type=chunk)[121](index=121&type=chunk) - Extensive state and federal regulation, particularly in California where over half of premiums are generated, can significantly impact operations, costs, and profitability[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[133](index=133&type=chunk) - Failure to price insurance policies appropriately, due to inaccurate information or models, could adversely affect business competitiveness and financial performance[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - Reliance on independent agents and a principal distribution partner (ADP), which generated **13.1%** of in-force premiums in 2018, poses risks if these relationships are disrupted or partners fail to market products effectively[135](index=135&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) - A downgrade in the company's **'A-' (Excellent)** A.M. Best financial strength rating could reduce business volume and harm relationships with partners[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - Inability to obtain or collect on reinsurance, including the LPT Agreement, could increase net liability for large and catastrophic losses[144](index=144&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) - The highly competitive and cyclical nature of the single-line workers' compensation market, with larger multi-line competitors, could adversely affect profitability[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk)[159](index=159&type=chunk) - Investment losses may arise from inability to meet investment objectives, general economic conditions, interest rate fluctuations, and market volatility, with equity securities now measured at fair value through net income[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - Dependence on subsidiaries for funds, with state laws restricting dividend payments, and potential need for additional capital on unfavorable terms, are significant financial risks[166](index=166&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk) - Failure to maintain, enhance, or modernize IT systems, or cyber-attacks, could disrupt operations, compromise data, and harm business[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Acts of terrorism and natural or man-made catastrophes could lead to substantial losses, especially given the inability to exclude coverage for terrorism in workers' compensation[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) - State insurance laws and charter provisions could prevent or delay a change in control, even if beneficial to stockholders[190](index=190&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) [Item 1B. Unresolved Staff Comments](index=22&type=section&id=Item%201B%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments from the SEC - No unresolved staff comments[196](index=196&type=chunk) [Item 2. Properties](index=22&type=section&id=Item%202%20Properties) As of February 1, 2019, the company leased 225,274 square feet of office space across 7 states, including its Reno headquarters, which is adequate - As of February 1, 2019, the company leased **225,274 square feet** of office space in **7 states**[197](index=197&type=chunk) - Principal executive offices are located in Reno, Nevada[197](index=197&type=chunk) - Management believes existing office space is adequate for current needs and will adjust lease agreements as required[197](index=197&type=chunk) [Item 3. Legal Proceedings](index=22&type=section&id=Item%203%20Legal%20Proceedings) The company is involved in various legal actions, primarily workers' compensation claims, with no expected material adverse effect on financial position or operations - The company is involved in pending and threatened litigation in the normal course of business, including claims for monetary damages and insurance/reinsurance coverage disputes[198](index=198&type=chunk) - Management believes the ultimate liability from such proceedings is not expected to have a material effect on results of operations, liquidity, or financial position[200](index=200&type=chunk) - Reductions in reinsurance recoveries due to disputes are factored into net loss and LAE reserves[199](index=199&type=chunk) [Item 4. Mine Safety Disclosures](index=22&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[201](index=201&type=chunk) PART II [Item 5. Market for Common Equity, Stockholder Matters & Equity Purchases](index=29&type=section&id=Item%205%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is listed on the NYSE under 'EIG', with future dividends determined by the Board and **$45.4 million** remaining in its share repurchase program - Common stock is listed on the NYSE under the symbol **'EIG'**[206](index=206&type=chunk) - As of February 14, 2019, there were **897** registered holders of record[206](index=206&type=chunk) - Future quarterly cash dividends are at the discretion of the Board of Directors, dependent on financial position, capital requirements, and market conditions[206](index=206&type=chunk) Issuer Purchases of Equity Securities (Q4 2018) | Period | Total Number of Shares Purchased | Average Price Per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in millions) | | :--- | :--- | :--- | :--- | :--- | | December 1 – December 31, 2018 | 102,531 | $41.06 | 102,531 | $45.4 | | Total | 102,531 | $41.06 | 102,531 | | - A share repurchase program authorized up to **$50.0 million** of common stock from February 26, 2018, through February 26, 2020, with **$45.4 million** remaining as of December 31, 2018[207](index=207&type=chunk)[312](index=312&type=chunk) Cumulative Total Return Performance (Dec 31, 2013 - Dec 31, 2018) | Period Ending | Employers Holdings, Inc. | S&P 500 | S&P 500 P&C Insurance Index | | :--- | :--- | :--- | :--- | | 12/31/2013 | $100.00 | $100.00 | $100.00 | | 12/31/2014 | $75.13 | $113.69 | $115.74 | | 12/31/2015 | $88.08 | $115.26 | $126.77 | | 12/31/2016 | $129.35 | $129.05 | $146.68 | | 12/31/2017 | $147.12 | $157.22 | $179.52 | | 12/31/2018 | $141.73 | $150.33 | $171.10 | [Item 6. Selected Financial Data](index=31&type=section&id=Item%206%20Selected%20Financial%20Data) This section provides a five-year summary of selected consolidated financial data, including income statement, balance sheet, and non-GAAP measures Selected Income Statement Data (2014-2018, in millions) | Metric | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net premiums earned | $731.1 | $716.5 | $694.8 | $690.4 | $684.5 | | Net investment income | $81.2 | $74.6 | $73.2 | $72.2 | $72.4 | | Net realized and unrealized (losses) gains on investments | $(13.1) | $7.4 | $11.2 | $(10.7) | $16.3 | | Total revenues | $800.4 | $801.4 | $779.8 | $752.1 | $773.5 | | Total expenses | $630.9 | $657.4 | $639.1 | $652.7 | $666.9 | | Net income before income taxes | $169.5 | $144.0 | $140.7 | $99.4 | $106.6 | | Income tax expense | $28.2 | $42.8 | $34.0 | $5.0 | $5.9 | | Net income | $141.3 | $101.2 | $106.7 | $94.4 | $100.7 | | Basic EPS | $4.30 | $3.11 | $3.29 | $2.94 | $3.19 | | Diluted EPS | $4.24 | $3.06 | $3.24 | $2.90 | $3.14 | | Cash dividends declared per common share | $0.80 | $0.60 | $0.36 | $0.24 | $0.24 | Selected Balance Sheet Data (2014-2018, in millions) | Metric | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $101.4 | $73.3 | $67.2 | $56.6 | $103.6 | | Total investments | $2,727.7 | $2,677.7 | $2,552.6 | $2,487.2 | $2,448.4 | | Reinsurance recoverable on paid and unpaid losses | $511.1 | $544.2 | $588.7 | $635.9 | $680.2 | | Total assets | $3,919.2 | $3,840.1 | $3,773.4 | $3,755.8 | $3,769.7 | | Unpaid losses and loss adjustment expense | $2,207.9 | $2,266.1 | $2,301.0 | $2,347.5 | $2,369.7 | | Unearned premiums | $336.3 | $318.3 | $310.3 | $308.9 | $310.8 | | Deferred Gain | $149.6 | $163.6 | $174.9 | $189.5 | $207.0 | | Total liabilities | $2,901.0 | $2,892.4 | $2,932.8 | $2,995.0 | $3,082.9 | | Total stockholders' equity | $1,018.2 | $947.7 | $840.6 | $760.8 | $686.8 | | Total stockholders' equity including Deferred Gain | $1,167.8 | $1,111.3 | $1,015.5 | $950.3 | $893.8 | Reconciliation of Net Income to Net Income Before Impact of LPT Agreement (2014-2018, in millions) | Metric | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net income | $141.3 | $101.2 | $106.7 | $94.4 | $100.7 | | Less amortization of the Deferred Gain related to losses | $9.9 | $9.3 | $9.7 | $9.5 | $11.2 | | Less amortization of the Deferred Gain related to contingent commission | $2.0 | $2.0 | $2.0 | $1.9 | $1.9 | | Less impact of LPT Reserve Adjustments | $2.2 | $0.0 | $3.1 | $6.4 | $31.1 | | Less impact of LPT Contingent Commission Adjustments | $0.5 | $0.3 | $1.8 | $2.6 | $10.8 | | Net income before impact of the LPT Agreement | $126.7 | $89.6 | $90.1 | $74.0 | $45.7 | [Item 7. Management's Discussion and Analysis](index=34&type=section&id=Item%207%20Management's%20Discussion%20and%20Analysis%20of%20Consolidated%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition and operations for 2016-2018, covering revenues, expenses, liquidity, capital, and critical accounting policies - The company focuses on providing workers' compensation insurance to select small businesses in low to medium hazard industries across **44 states and D.C.**, with a concentration in California[228](index=228&type=chunk) - Underwriting results have improved due to increased pricing flexibility, multi-company pricing platforms, territorial pricing in California, and ongoing underwriting initiatives[230](index=230&type=chunk) - Pricing on renewals decreased by **11.8%** in 2018, driven by favorable loss costs and frequency trends, and accelerated claims initiatives[231](index=231&type=chunk) - The company is acquiring PartnerRe Insurance Company of New York (PRNY) for approximately **$40.0 million** in statutory capital and surplus plus **$5.8 million**, with PRUS indemnifying all existing liabilities[232](index=232&type=chunk)[233](index=233&type=chunk) Net Income and Underwriting Income (2016-2018, in millions) | Metric | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net income | $141.3 | $101.2 | $106.7 | | Underwriting income | $101.7 | $68.0 | $57.3 | - Key factors affecting financial performance include decreased losses and LAE in 2018 (down **10%**), increased underwriting and other operating expenses in 2018 (up **13%**), and volatility in net realized and unrealized investment gains/losses[239](index=239&type=chunk) - 2018 results included **$66.2 million** favorable prior year accident loss development, **$2.2 million** favorable LPT Reserve Adjustment, **$0.5 million** LPT Contingent Commission Adjustment, and **$25.6 million** net unrealized losses on equity securities[241](index=241&type=chunk) - The Tax Cuts and Jobs Act favorably impacted income tax expense by reducing the statutory rate from **35% to 21%** starting in 2018[241](index=241&type=chunk) Gross and Net Premiums Written (2016-2018, in millions) | Metric | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Gross premiums written | $748.9 | $729.7 | $701.4 | | Net premiums written | $742.8 | $723.7 | $694.6 | - Gross premiums written increased in 2018 due to higher new business policy counts and payroll exposure, partially offset by lower average rates, while 2017 saw increases from new business and final audit premiums, impacted by California legislation (AB 2883 and SB 189)[250](index=250&type=chunk) Net Investment Income and Realized/Unrealized Gains (2016-2018, in millions) | Metric | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net investment income | $81.2 | $74.6 | $73.2 | | Net realized and unrealized (losses) gains on investments | $(13.1) | $7.4 | $11.2 | - Net investment income increased in 2018 due to a higher pre-tax yield on invested assets (**3.4%** in 2018 vs. **3.1%** in 2017 and 2016)[256](index=256&type=chunk) - Net realized and unrealized losses in 2018 were **$(13.1) million**, including **$25.6 million** unrealized losses on equity securities due to market volatility, partially offset by **$12.5 million** realized gains[258](index=258&type=chunk) Combined Ratios (2016-2018) | Ratio | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Loss and LAE ratio | 51.5% | 58.2% | 60.1% | | Underwriting and other operating expenses ratio | 21.7% | 19.5% | 19.7% | | Commission expense ratio | 12.9% | 12.8% | 12.0% | | Combined ratio | 86.1% | 90.5% | 91.8% | - Losses and LAE decreased from **$417.2 million** in 2017 to **$376.7 million** in 2018, primarily due to **$66.2 million** favorable prior accident year loss development[271](index=271&type=chunk) - Underwriting and other operating expenses increased by **$18.6 million** in 2018, largely due to aggressive development and implementation of new digital technologies and capabilities[277](index=277&type=chunk)[279](index=279&type=chunk) - Commission expenses increased due to higher agency incentive commissions and increased business from partnerships/alliances[281](index=281&type=chunk) - Holding company liquidity is dependent on existing capital and dividends from subsidiaries, which are restricted by state insurance laws[289](index=289&type=chunk)[290](index=290&type=chunk) Net Cash Flows (2016-2018, in millions) | Activity | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Operating activities | $180.2 | $142.3 | $122.8 | | Investing activities | $(119.6) | $(112.8) | $(87.5) | | Financing activities | $(32.9) | $(26.0) | $(23.6) | | Increase in cash, cash equivalents, and restricted cash | $27.7 | $3.5 | $11.7 | - Operating cash flows increased in 2018, driven by net premiums and investment income, partially offset by claims and operating expenses[305](index=305&type=chunk) - Investing activities primarily involved investment of premiums and reinvestment of funds, with sales used to fund claims, expenses, and shareholder returns[308](index=308&type=chunk) - Financing activities in 2018 included common stock repurchases (**$4.6 million**) and stockholder dividend payments (**$26.7 million**)[309](index=309&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk) - Capital resources include **$20.0 million** in surplus notes, **$1,018.2 million** in stockholders' equity, and a **$149.6 million** Deferred Gain as of December 31, 2018[313](index=313&type=chunk) Contractual Obligations and Commitments (as of Dec 31, 2018, in millions) | Obligation Type | Total | Less Than 1 Year | 1-3 Years | 4-5 Years | More Than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases | $22.5 | $5.3 | $7.3 | $3.7 | $6.2 | | Non-cancellable contracts | $18.8 | $5.9 | $6.7 | $6.2 | $0.0 | | Notes payable | $41.4 | $1.4 | $2.7 | $2.7 | $34.6 | | Capital leases | $0.9 | $0.3 | $0.5 | $0.1 | $0.0 | | Unpaid losses and LAE reserves | $2,207.9 | $370.4 | $480.2 | $288.7 | $1,068.6 | | Unfunded investments | $50.0 | $50.0 | $0.0 | $0.0 | $0.0 | | Total contractual obligations | $2,341.5 | $433.3 | $497.4 | $301.4 | $1,109.4 | - The investment portfolio is **92%** fixed maturity securities with a weighted average quality of **'AA-'** and a duration of **4.1** at December 31, 2018, aiming to limit interest rate risk[325](index=325&type=chunk) - Loss reserves are inherently uncertain estimates of ultimate costs, not discounted for time value, and are subject to significant judgment and actuarial review[337](index=337&type=chunk)[338](index=338&type=chunk)[340](index=340&type=chunk)[346](index=346&type=chunk) Actuarial Range of Loss Reserves (as of Dec 31) | Metric | 2018 (in millions) | 2017 (in millions) | | :--- | :--- | :--- | | Low end of actuarial range | $1,484.8 | $1,533.1 | | Carried reserves | $1,703.5 | $1,729.1 | | High end of actuarial range | $1,897.3 | $1,916.5 | - Reinsurance recoverables, including **$408.2 million** related to the LPT Agreement at December 31, 2018, are monitored for credit risk, with collateral held to mitigate insolvency risks[375](index=375&type=chunk)[376](index=376&type=chunk) - The company adopted ASU 2016-01 in 2018, requiring equity securities at fair value to be recognized through net income, leading to a **$74.0 million** reclassification adjustment from AOCI to retained earnings[385](index=385&type=chunk)[405](index=405&type=chunk) - The company is evaluating the impact of ASU 2016-13 (Credit Losses) and expects ASU 2016-02 (Leases) to result in **$18.4 million** in lease assets and **$20.2 million** in lease liabilities on the balance sheet upon adoption[395](index=395&type=chunk)[522](index=522&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%207A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to credit, interest rate, and equity price risks, managed through diversification and duration, including sensitivity analysis and inflation impact - The company is exposed to credit risk in its investment portfolio, reinsurance recoverables, and premiums receivable, managed through issuer/industry diversification and collateral[409](index=409&type=chunk)[410](index=410&type=chunk) - Interest rate risk on the fixed maturity portfolio is managed by maintaining a short-to-intermediate duration (**4.1** at December 31, 2018) and balancing duration, yield, and credit risk[411](index=411&type=chunk) Estimated Pre-tax (Decrease) in Fair Value of Fixed Maturity Securities and Short-Term Investments due to Hypothetical Interest Rate Changes (as of Dec 31, 2018) | Hypothetical Changes in Interest Rates | Estimated Pre-tax (Decrease) in Fair Value (in millions) | Percentage Change | | :--- | :--- | :--- | | 300 basis point rise | $(288.2) | (11.4)% | | 200 basis point rise | $(194.3) | (7.7)% | | 100 basis point rise | $(97.4) | (3.9)% | | 50 basis point decline | $48.0 | 1.9% | | 100 basis point decline | $95.2 | 3.8% | - Equity price risk is minimized by investing in mid-to-large capitalization issuers and diversifying holdings across industry sectors[415](index=415&type=chunk) Sensitivity of Equity Securities to Price Changes (as of Dec 31, 2018, in millions) | Metric | Cost | Fair Value | 10% Fair Value Decrease | Impact on Total Equity Securities | 10% Fair Value Increase | Impact on Total Equity Securities | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Equity securities | $131.9 | $199.9 | $179.9 | $(20.0) | $219.9 | $20.0 | - Inflation could impact financial statements by increasing claims costs (medical, litigation) above reserves, requiring reserve increases and reducing earnings, and also influences interest rates and operating expenses[416](index=416&type=chunk)[417](index=417&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=62&type=section&id=Item%208%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2016-2018, including Balance Sheets, Income, Equity, and Cash Flows, with reports on internal controls and GAAP compliance - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2018, based on the COSO framework[425](index=425&type=chunk) - Ernst & Young LLP, the independent registered public accounting firm, issued an unqualified opinion on the effectiveness of internal control over financial reporting and on the consolidated financial statements[428](index=428&type=chunk)[436](index=436&type=chunk) - The company changed its method of accounting for investments in equity securities in 2018 due to the adoption of ASU No. 2016-01[438](index=438&type=chunk) Consolidated Balance Sheets (as of Dec 31, in millions) | Asset/Liability/Equity | 2018 | 2017 | | :--- | :--- | :--- | | Total investments | $2,727.7 | $2,677.7 | | Cash and cash equivalents | $101.4 | $73.3 | | Total assets | $3,919.2 | $3,840.1 | | Unpaid losses and loss adjustment expenses | $2,207.9 | $2,266.1 | | Total liabilities | $2,901.0 | $2,892.4 | | Total stockholders' equity | $1,018.2 | $947.7 | Consolidated Statements of Comprehensive Income (Years Ended Dec 31, in millions) | Revenue/Expense | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net premiums earned | $731.1 | $716.5 | $694.8 | | Net investment income | $81.2 | $74.6 | $73.2 | | Net realized and unrealized (losses) gains on investments | $(13.1) | $7.4 | $11.2 | | Total revenues | $800.4 | $801.4 | $779.8 | | Losses and loss adjustment expenses | $376.7 | $417.2 | $417.9 | | Total expenses | $630.9 | $657.4 | $639.1 | | Net income | $141.3 | $101.2 | $106.7 | | Basic EPS | $4.30 | $3.11 | $3.29 | | Diluted EPS | $4.24 | $3.06 | $3.24 | Consolidated Statements of Cash Flows (Years Ended Dec 31, in millions) | Cash Flow Activity | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $180.2 | $142.3 | $122.8 | | Net cash used in investing activities | $(119.6) | $(112.8) | $(87.5) | | Net cash used in financing activities | $(32.9) | $(26.0) | $(23.6) | | Net increase in cash, cash equivalents, and restricted cash | $27.7 | $3.5 | $11.7 | | Cash, cash equivalents, and restricted cash at end of period | $102.0 | $74.3 | $70.8 | Reconciliation of Changes in Liability for Unpaid Losses and LAE (Years Ended Dec 31, in millions) | Metric | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Unpaid losses and LAE at beginning of period | $2,266.1 | $2,301.0 | $2,347.5 | | Net unpaid losses and LAE at beginning of period | $1,729.1 | $1,721.0 | $1,719.3 | | Total net losses and LAE incurred during the period | $391.3 | $428.8 | $434.5 | | Total net paid losses and LAE during the period | $416.9 | $420.7 | $432.8 | | Unpaid losses and LAE at end of period | $2,207.9 | $2,266.1 | $2,301.0 | - The company experienced **$66.2 million** of favorable prior accident year loss development in 2018, **$18.5 million** in 2017, and **$18.4 million** in 2016, primarily due to favorable paid loss trends and accelerated claims settlement activity[593](index=593&type=chunk) - The company's investment portfolio at December 31, 2018, consisted of **92%** fixed maturity securities with a weighted average quality of **'AA-'**[325](index=325&type=chunk) Fixed Maturity Securities by Credit Rating (as of Dec 31, 2018) | Rating | Percentage of Total Estimated Fair Value | | :--- | :--- | | "AAA" | 8.3% | | "AA" | 42.2% | | "A" | 31.3% | | "BBB" | 12.4% | | Below Investment Grade | 5.8% | | Total | 100.0% | - The company recognized impairments on fixed maturity securities of **$3.3 million** in 2018 and **$0.5 million** in 2017 due to intent to sell or severity of fair value changes[333](index=333&type=chunk)[552](index=552&type=chunk) - The Tax Cuts and Jobs Act reduced the corporate statutory income tax rate from **35% to 21%** starting January 1, 2018, impacting deferred tax assets and liabilities[569](index=569&type=chunk) Income Tax Expense (Years Ended Dec 31, in millions) | Tax Component | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Current tax expense | $13.8 | $18.6 | $20.6 | | Deferred federal tax expense | $14.4 | $24.2 | $13.4 | | Income tax expense | $28.2 | $42.8 | $34.0 | - The company had **$20.0 million** in surplus notes outstanding at December 31, 2018, maturing in 2034, with interest and principal payments subject to regulatory approval[612](index=612&type=chunk) - The company's insurance subsidiaries have access to collateralized advances and standby letters of credit from the FHLB, with **$140.0 million** in letters of credit issued as of December 31, 2018[616](index=616&type=chunk)[617](index=617&type=chunk) - The company had an unfunded commitment of **$50.0 million** to a private investment fund as of December 31, 2018[623](index=623&type=chunk) Stock-Based Compensation Expense (Years Ended Dec 31, in millions) | Component | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Stock options | $0.3 | $0.5 | $0.7 | | RSUs | $2.5 | $2.0 | $1.9 | | PSUs | $6.5 | $4.3 | $3.2 | | Total | $9.3 | $6.8 | $5.8 | | Less: related tax benefit | $2.0 | $2.4 | $2.0 | | Net stock-based compensation expense | $7.3 | $4.4 | $3.8 | - As of December 31, 2018, the company had **190,256** stock options outstanding, **250,300** RSUs outstanding, and **291,616** PSUs outstanding (at target rate)[633](index=633&type=chunk)[636](index=636&type=chunk)[638](index=638&type=chunk) - The company's insurance subsidiaries were in compliance with statutory capital and surplus requirements and RBC levels above all regulatory action levels as of December 31, 2018[650](index=650&type=chunk) Selected Quarterly Financial Data (2018, in millions) | Metric | March 31 | June 30 | September 30 | December 31 | | :--- | :--- | :--- | :--- | :--- | | Net premiums earned | $176.6 | $178.0 | $192.9 | $183.6 | | Net realized and unrealized (losses) gains on investments | $(8.0) | $5.7 | $15.6 | $(26.4) | | Losses and loss adjustment expenses | $95.4 | $87.8 | $106.6 | $86.9 | | Net income | $25.6 | $42.5 | $47.6 | $25.6 | | Basic EPS | $0.78 | $1.29 | $1.45 | $0.78 | | Diluted EPS | $0.77 | $1.28 | $1.43 | $0.77 | - Quarterly results in 2018 were impacted by volatility in equity markets affecting net unrealized gains/losses on investments and favorable prior accident year loss development[662](index=662&type=chunk)[663](index=663&type=chunk)[665](index=665&type=chunk)[666](index=666&type=chunk)[667](index=667&type=chunk) [Item 9. Changes in and Disagreements With Accountants](index=85&type=section&id=Item%209%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with accountants on accounting and financial disclosure matters - No changes in or disagreements with accountants on accounting and financial disclosure[670](index=670&type=chunk) [Item 9A. Controls and Procedures](index=85&type=section&id=Item%209A%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2018, with no material weaknesses or changes in internal control - Disclosure controls and procedures were evaluated and deemed effective at a reasonable level of assurance as of December 31, 2018[672](index=672&type=chunk) - Management found no material weaknesses in internal control over financial reporting[425](index=425&type=chunk) - No material changes in internal control over financial reporting occurred during the fourth fiscal quarter[675](index=675&type=chunk) [Item 9B. Other Information](index=85&type=section&id=Item%209B%20Other%20Information) The company reports no other information required by this item - None[676](index=676&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=86&type=section&id=Item%2010%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, corporate governance, and Section 16 compliance is incorporated by reference from the 2019 Proxy Statement - Information on executive officers, directors, corporate governance, and Section 16 compliance is incorporated by reference from the 2019 Annual Meeting Proxy Statement[679](index=679&type=chunk)[680](index=680&type=chunk)[681](index=681&type=chunk)[682](index=682&type=chunk) - Corporate Governance Guidelines, Code of Business Conduct and Ethics, and Code of Ethics for Senior Financial Officers are available on the company's website[20](index=20&type=chunk)[683](index=683&type=chunk) [Item 11. Executive Compensation](index=86&type=section&id=Item%2011%20Executive%20Compensation) Information on executive compensation, including discussion, analysis, and committee reports, is incorporated by reference from the 2019 Proxy Statement - Information on executive compensation is incorporated by reference from the 2019 Annual Meeting Proxy Statement[684](index=684&type=chunk) [Item 12. Security Ownership & Related Stockholder Matters](index=86&type=section&id=Item%2012%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference from the 2019 Proxy Statement, detailing equity compensation plans with **732,172** securities outstanding and **2,734,274** shares available - Information on security ownership is incorporated by reference from the 2019 Annual Meeting Proxy Statement[685](index=685&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2018) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants, rights | Weighted-average exercise price of outstanding options, warrants, and rights | Number of securities remaining available for further issuance under compensation plans | | :--- | :--- | :--- | :--- | | Stock options | 190,256 | $23.71 | 3,276,190 | | RSUs | 250,300 | N/A | 3,025,890 | | PSUs | 291,616 | N/A | 2,734,274 | | Total | 732,172 | $23.71 | 2,734,274 | - RSUs and PSUs do not have voting rights and do not require an exercise price, with dividend equivalents for eligible RSUs and PSUs payable in cash upon vesting[692](index=692&type=chunk) [Item 13. Certain Relationships & Director Independence](index=87&type=section&id=Item%2013%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Annual Meeting Proxy Statement[693](index=693&type=chunk) [Item 14. Principal Accountant Fees and Services](index=87&type=section&id=Item%2014%20Principal%20Accountant%20Fees%20and%20Services) Information on fees and services provided by Ernst & Young LLP is incorporated by reference from the company's 2019 Annual Meeting Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2019 Annual Meeting Proxy Statement[694](index=694&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=88&type=section&id=Item%2015%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists consolidated financial statements filed in Item 8 and provides a schedule of exhibits, including corporate documents, agreements, and Schedule II - Consolidated financial statements are filed in Item 8[697](index=697&type=chunk) - Schedule II, Condensed Financial Information of Registrant, is included[697](index=697&type=chunk) - Financial Statement Schedules I, III, IV, V, and VI have been omitted as the information is included in the Notes to Consolidated Financial Statements[697](index=697&type=chunk) Condensed Balance Sheets (Employers Holdings, Inc. only, as of Dec 31, in millions) | Asset/Liability/Equity | 2018 | 2017 | | :--- | :--- | :--- | | Investment in subsidiaries | $873.8 | $849.6 | | Total investments | $962.1 | $894.7 | | Cash and cash equivalents | $41.3 | $39.6 | | Total assets | $1,027.6 | $954.1 | | Total liabilities | $9.4 | $6.4 | | Total stockholders' equity | $1,018.2 | $947.7 | Condensed Statements of Income (Employers Holdings, Inc. only, Years Ended Dec 31, in millions) | Revenue/Expense | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net investment income | $2.5 | $1.3 | $1.9 | | Total revenues | $3.3 | $1.3 | $9.9 | | Other operating expenses | $17.5 | $15.2 | $13.8 | | Net loss before equity in earnings of subsidiaries | $(9.9) | $(8.1) | $(0.4) | | Equity in earnings of subsidiaries | $151.2 | $109.3 | $107.1 | | Net income | $141.3 | $101.2 | $106.7 | | Basic EPS | $4.30 | $3.11 | $3.29 | | Diluted EPS | $4.24 | $3.06 | $3.24 | Condensed Statement of Cash Flows (Employers Holdings, Inc. only, Years Ended Dec 31, in millions) | Cash Flow Activity | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $77.5 | $48.7 | $(7.2) | | Net cash (used in) provided by investing activities | $(43.1) | $(34.6) | $70.8 | | Net cash used in financing activities | $(32.7) | $(15.9) | $(23.6) | | Net increase (decrease) in cash and cash equivalents | $1.7 | $(1.8) | $40.0 | | Cash and cash equivalents at the end of the period | $41.3 | $39.6 | $41.4 | [Signatures](index=95&type=section&id=SIGNATURES) The report is signed by Michael S. Paquette, EVP and CFO, and certified by the Chairman, President and CEO, and other Directors as of February 28, 2019 - Report signed by Michael S. Paquette, Executive Vice President and Chief Financial Officer, on February 28, 2019[716](index=716&type=chunk)[717](index=717&type=chunk) - Certified by Michael D. Rumbolz (Chairman), Douglas D. Dirks (President and CEO), and other Directors[718](index=718&type=chunk)

Employers Holdings, Inc. (NYSE:EIG) Q4 2018 Earnings Conference Call February 21, 2019 11:30 AM ET Company Participants Doug Dirks - Chief Executive Officer Mike Paquette - Chief Financial Officer Steve Festa - Chief Operating Officer Conference Call Participants Mark Hughes - SunTrust Bob Farnam - Boenning & Scattergood Operator Good day, ladies and gentlemen, and welcome to the Q4 2018 Employers Holdings, Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Foll ...