Nevada
|
|
04-3850065
|
(State or other jurisdiction
of incorporation or organization)
|
|
(I.R.S. Employer
Identification Number)
|
10375 Professional Circle
|
||
Reno,
|
Nevada
|
89521
|
(Address of principal executive offices and zip code)
|
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
Common Stock, $0.01 par value per share
|
|
EIG
|
|
New York Stock Exchange
|
Large accelerated filer
|
☑
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
|
|
|
|
|
|
Emerging growth company
|
☐
|
|
|
Page
No.
|
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
|
|
|
|
|
|
|
|
|
Employers Holdings, Inc. and Subsidiaries
|
||||||||
Consolidated Balance Sheets
|
||||||||
(in millions, except share data)
|
||||||||
|
|
As of
|
|
As of
|
||||
|
|
September 30,
2019 |
|
December 31,
2018 |
||||
Assets
|
|
(unaudited)
|
|
|
||||
Investments:
|
|
|
|
|
||||
Fixed maturity securities at fair value (amortized cost $2,394.6 at September 30, 2019 and $2,513.7 at December 31, 2018)
|
|
$
|
2,480.8
|
|
|
$
|
2,496.4
|
|
Equity securities at fair value (cost $199.0 at September 30, 2019 and $131.9 at December 31, 2018)
|
|
284.7
|
|
|
199.9
|
|
||
Equity securities at cost
|
|
6.7
|
|
|
6.4
|
|
||
Other invested assets
|
|
24.7
|
|
|
—
|
|
||
Short-term investments at fair value (amortized cost $25.0 at December 31, 2018)
|
|
—
|
|
|
25.0
|
|
||
Total investments
|
|
2,796.9
|
|
|
2,727.7
|
|
||
Cash and cash equivalents
|
|
140.3
|
|
|
101.4
|
|
||
Restricted cash and cash equivalents
|
|
0.3
|
|
|
0.6
|
|
||
Accrued investment income
|
|
17.5
|
|
|
18.0
|
|
||
Premiums receivable (less bad debt allowance of $5.7 at September 30, 2019 and $6.7 at December 31, 2018)
|
|
314.7
|
|
|
333.1
|
|
||
Reinsurance recoverable for:
|
|
|
|
|
||||
Paid losses
|
|
7.1
|
|
|
6.7
|
|
||
Unpaid losses
|
|
527.1
|
|
|
504.4
|
|
||
Deferred policy acquisition costs
|
|
51.2
|
|
|
48.2
|
|
||
Deferred income taxes, net
|
|
0.1
|
|
|
26.9
|
|
||
Property and equipment, net
|
|
23.9
|
|
|
18.2
|
|
||
Operating lease right-of-use assets
|
|
15.0
|
|
|
—
|
|
||
Intangible assets, net
|
|
13.6
|
|
|
7.7
|
|
||
Goodwill
|
|
36.2
|
|
|
36.2
|
|
||
Contingent commission receivable—LPT Agreement
|
|
13.2
|
|
|
32.0
|
|
||
Cloud computing arrangements
|
|
30.4
|
|
|
26.0
|
|
||
Other assets
|
|
37.4
|
|
|
32.1
|
|
||
Total assets
|
|
$
|
4,024.9
|
|
|
$
|
3,919.2
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
||
Unpaid losses and loss adjustment expenses
|
|
$
|
2,197.3
|
|
|
$
|
2,207.9
|
|
Unearned premiums
|
|
360.3
|
|
|
336.3
|
|
||
Commissions and premium taxes payable
|
|
52.0
|
|
|
57.3
|
|
||
Accounts payable and accrued expenses
|
|
27.3
|
|
|
37.1
|
|
||
Deferred reinsurance gain—LPT Agreement
|
|
139.4
|
|
|
149.6
|
|
||
Notes payable
|
|
—
|
|
|
20.0
|
|
||
Operating lease liability
|
|
17.1
|
|
|
—
|
|
||
Non-cancellable obligations
|
|
20.4
|
|
|
18.8
|
|
||
Other liabilities
|
|
50.7
|
|
|
74.0
|
|
||
Total liabilities
|
|
$
|
2,864.5
|
|
|
$
|
2,901.0
|
|
Commitments and contingencies
|
|
|
|
|
|
|
Employers Holdings, Inc. and Subsidiaries
|
||||||||
Consolidated Balance Sheets
|
||||||||
(in millions, except share data)
|
||||||||
|
|
As of
|
|
As of
|
||||
|
|
September 30,
2019 |
|
December 31,
2018 |
||||
Stockholders’ equity:
|
|
(unaudited)
|
|
|
|
|||
Common stock, $0.01 par value; 150,000,000 shares authorized; 57,178,320 and 56,975,675 shares issued and 31,814,678 and 32,765,792 shares outstanding at September 30, 2019 and December 31, 2018, respectively
|
|
$
|
0.6
|
|
|
$
|
0.6
|
|
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued
|
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
|
393.0
|
|
|
388.8
|
|
||
Retained earnings
|
|
1,134.3
|
|
|
1,030.7
|
|
||
Accumulated other comprehensive income (loss), net of tax
|
|
68.1
|
|
|
(13.7
|
)
|
||
Treasury stock, at cost (25,363,642 shares at September 30, 2019 and 24,209,883 shares at December 31, 2018)
|
|
(435.6
|
)
|
|
(388.2
|
)
|
||
Total stockholders’ equity
|
|
1,160.4
|
|
|
1,018.2
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
4,024.9
|
|
|
$
|
3,919.2
|
|
Employers Holdings, Inc. and Subsidiaries
|
||||||||||||||||
Consolidated Statements of Comprehensive Income
|
||||||||||||||||
(in millions, except per share data)
|
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues
|
|
(unaudited)
|
|
(unaudited)
|
||||||||||||
Net premiums earned
|
|
$
|
175.8
|
|
|
$
|
192.9
|
|
|
$
|
526.1
|
|
|
$
|
547.5
|
|
Net investment income
|
|
22.3
|
|
|
20.2
|
|
|
65.5
|
|
|
59.9
|
|
||||
Net realized and unrealized gains on investments
|
|
2.6
|
|
|
15.6
|
|
|
33.3
|
|
|
13.2
|
|
||||
Other income
|
|
0.3
|
|
|
0.2
|
|
|
0.6
|
|
|
0.4
|
|
||||
Total revenues
|
|
201.0
|
|
|
228.9
|
|
|
625.5
|
|
|
621.0
|
|
||||
Expenses
|
|
|
|
|
|
|
|
|
|
|
||||||
Losses and loss adjustment expenses
|
|
92.9
|
|
|
106.6
|
|
|
268.2
|
|
|
289.7
|
|
||||
Commission expense
|
|
21.9
|
|
|
24.8
|
|
|
67.7
|
|
|
73.1
|
|
||||
Underwriting and other operating expenses
|
|
45.3
|
|
|
38.8
|
|
|
136.6
|
|
|
118.1
|
|
||||
Interest and financing expenses
|
|
—
|
|
|
0.4
|
|
|
0.6
|
|
|
1.1
|
|
||||
Total expenses
|
|
160.1
|
|
|
170.6
|
|
|
473.1
|
|
|
482.0
|
|
||||
Net income before income taxes
|
|
40.9
|
|
|
58.3
|
|
|
152.4
|
|
|
139.0
|
|
||||
Income tax expense
|
|
8.1
|
|
|
10.7
|
|
|
27.0
|
|
|
23.3
|
|
||||
Net income
|
|
$
|
32.8
|
|
|
$
|
47.6
|
|
|
$
|
125.4
|
|
|
$
|
115.7
|
|
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive income
|
|
|
|
|
|
|
|
|
||||||||
Unrealized AFS investment gains (losses) arising during the period (net of tax (expense) benefit of $(4.3) and $2.4 for the three months ended September 30, 2019 and 2018, respectively, and $(22.3) and $15.0 for the nine months ended September 30, 2019 and 2018, respectively)
|
|
$
|
16.4
|
|
|
$
|
(9.2
|
)
|
|
$
|
84.1
|
|
|
$
|
(56.3
|
)
|
Reclassification adjustment for realized AFS investment (gains) losses in net income (net of tax (expense) benefit of $0.4 for the three months ended September 30, 2019, and $0.6 and $0.1 for the nine months ended September 30, 2019 and 2018, respectively)
|
|
(1.6
|
)
|
|
—
|
|
|
(2.3
|
)
|
|
0.4
|
|
||||
Other comprehensive income (loss), net of tax
|
|
14.8
|
|
|
(9.2
|
)
|
|
81.8
|
|
|
(55.9
|
)
|
||||
Total comprehensive income
|
|
$
|
47.6
|
|
|
$
|
38.4
|
|
|
$
|
207.2
|
|
|
$
|
59.8
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net realized and unrealized gains on investments
|
|
|
|
|
|
|
|
|
||||||||
Net realized and unrealized gains on investments before impairments
|
|
$
|
2.6
|
|
|
$
|
15.6
|
|
|
$
|
33.3
|
|
|
$
|
15.2
|
|
Other than temporary impairment recognized in earnings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
||||
Net realized and unrealized gains on investments
|
|
$
|
2.6
|
|
|
$
|
15.6
|
|
|
$
|
33.3
|
|
|
$
|
13.2
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per common share (Note 13):
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
1.03
|
|
|
$
|
1.45
|
|
|
$
|
3.90
|
|
|
$
|
3.52
|
|
Diluted
|
|
$
|
1.01
|
|
|
$
|
1.43
|
|
|
$
|
3.85
|
|
|
$
|
3.48
|
|
Cash dividends declared per common share and eligible RSUs and PSUs
|
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
0.66
|
|
|
$
|
0.60
|
|
Employers Holdings, Inc. and Subsidiaries
|
||||||||||||||||||||||||||
Consolidated Statements of Stockholders’ Equity
|
||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2019 and 2018
|
||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Income (Loss), Net
|
|
Treasury Stock at Cost
|
|
Total Stockholders’ Equity
|
|||||||||||||||
|
Shares Issued
|
|
Amount
|
|
|
|
|
|
||||||||||||||||||
|
(in millions, except share data)
|
|||||||||||||||||||||||||
Balance, January 1, 2019
|
56,975,675
|
|
|
$
|
0.6
|
|
|
$
|
388.8
|
|
|
$
|
1,030.7
|
|
|
$
|
(13.7
|
)
|
|
$
|
(388.2
|
)
|
|
$
|
1,018.2
|
|
Stock-based obligations
|
—
|
|
|
—
|
|
|
6.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.8
|
|
||||||
Stock options exercised
|
25,580
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
||||||
Vesting of RSUs and PSUs, net of shares withheld to satisfy tax withholdings
|
177,065
|
|
|
—
|
|
|
(3.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.2
|
)
|
||||||
Acquisition of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47.4
|
)
|
|
(47.4
|
)
|
||||||
Dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(21.8
|
)
|
|
—
|
|
|
—
|
|
|
(21.8
|
)
|
||||||
Net income for the period
|
—
|
|
|
—
|
|
|
—
|
|
|
125.4
|
|
|
—
|
|
|
—
|
|
|
125.4
|
|
||||||
Change in net unrealized gains on investments, net of taxes of $(21.7)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
81.8
|
|
|
—
|
|
|
81.8
|
|
||||||
Balance,September 30, 2019
|
57,178,320
|
|
|
$
|
0.6
|
|
|
$
|
393.0
|
|
|
$
|
1,134.3
|
|
|
$
|
68.1
|
|
|
$
|
(435.6
|
)
|
|
$
|
1,160.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, January 1, 2018
|
56,695,174
|
|
|
$
|
0.6
|
|
|
$
|
381.2
|
|
|
$
|
842.2
|
|
|
$
|
107.4
|
|
|
$
|
(383.7
|
)
|
|
$
|
947.7
|
|
Stock-based obligations
|
—
|
|
|
—
|
|
|
5.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.9
|
|
||||||
Stock options exercised
|
51,091
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
||||||
Vesting of RSUs and PSUs, net of shares withheld to satisfy tax withholdings
|
157,753
|
|
|
—
|
|
|
(2.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.9
|
)
|
||||||
Acquisition of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
(0.3
|
)
|
||||||
Dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(19.9
|
)
|
|
—
|
|
|
—
|
|
|
(19.9
|
)
|
||||||
Net income for the period
|
|
|
—
|
|
|
—
|
|
|
115.7
|
|
|
—
|
|
|
—
|
|
|
115.7
|
|
|||||||
Reclassification adjustment for adoption of ASU No. 2016-01
|
—
|
|
|
—
|
|
|
—
|
|
|
74.0
|
|
|
(74.0
|
)
|
|
—
|
|
|
—
|
|
||||||
Change in net unrealized losses on investments, net of taxes of $14.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(55.9
|
)
|
|
—
|
|
|
(55.9
|
)
|
|||||||
Balance, September 30, 2018
|
56,904,018
|
|
|
$
|
0.6
|
|
|
$
|
385.2
|
|
|
$
|
1,011.9
|
|
|
$
|
(22.5
|
)
|
|
$
|
(384.0
|
)
|
|
$
|
991.2
|
|
|
|
As of
|
|
As of
|
||||
|
|
September 30,
2019 |
|
December 31,
2018 |
||||
|
|
(in millions)
|
||||||
Cash and cash equivalents
|
|
$
|
140.3
|
|
|
$
|
101.4
|
|
Restricted cash and cash equivalents supporting reinsurance obligations
|
|
0.3
|
|
|
0.6
|
|
||
Total cash, cash equivalents and restricted cash
|
|
$
|
140.6
|
|
|
$
|
102.0
|
|
|
|
Nine Months Ended
|
||
|
|
September 30, 2019
|
||
|
|
(in millions, except per share data)
|
||
LPT Reserve Adjustment
|
|
$
|
(5.3
|
)
|
Cumulative adjustment to the Deferred Gain(1)
|
|
(1.8
|
)
|
|
Net income impact from this change in estimate
|
|
1.8
|
|
|
Earnings per common share impact from this change in estimate:
|
|
|
||
Basic and Diluted
|
|
0.06
|
|
(1)
|
The cumulative adjustment to the Deferred reinsurance gain–LPT Agreement (Deferred Gain) was also recognized in losses and LAE incurred in the Company’s Consolidated Statement of Comprehensive Income, so that the Deferred Gain reflects the balance that would have existed had the revised loss and LAE reserves been recognized at the inception of the LPT Agreement.
|
|
|
Nine Months Ended
|
||
|
|
September 30, 2019
|
||
|
|
(in millions, except per share data)
|
||
LPT Contingent Commission Adjustment
|
|
$
|
0.3
|
|
Net income impact from this change in estimate
|
|
0.2
|
|
|
Earnings per common share impact from this change in estimate:
|
|
|
||
Basic and Diluted
|
|
0.01
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
||||||||
|
|
(in millions)
|
||||||||||||||
Financial assets
|
|
|
|
|
|
|
|
|
||||||||
Total investments at fair value
|
|
$
|
2,765.5
|
|
|
$
|
2,765.5
|
|
|
$
|
2,721.3
|
|
|
$
|
2,721.3
|
|
Cash and cash equivalents
|
|
140.3
|
|
|
140.3
|
|
|
101.4
|
|
|
101.4
|
|
||||
Restricted cash and cash equivalents
|
|
0.3
|
|
|
0.3
|
|
|
0.6
|
|
|
0.6
|
|
||||
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
||||||
Notes payable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20.0
|
|
|
$
|
23.5
|
|
•
|
Level 1 - Inputs are unadjusted quoted market prices for identical assets or liabilities in active markets at the measurement date.
|
•
|
Level 2 - Inputs other than Level 1 prices that are observable for similar assets or liabilities through corroboration with market data at the measurement date.
|
•
|
Level 3 - Inputs that are unobservable that reflect management’s best estimate of what willing market participants would use in pricing the assets or liabilities at the measurement date.
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Treasuries
|
|
$
|
—
|
|
|
$
|
84.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
106.4
|
|
|
$
|
—
|
|
U.S. Agencies
|
|
—
|
|
|
2.9
|
|
|
—
|
|
|
—
|
|
|
11.4
|
|
|
—
|
|
||||||
States and municipalities
|
|
—
|
|
|
492.7
|
|
|
—
|
|
|
—
|
|
|
528.0
|
|
|
—
|
|
||||||
Corporate securities
|
|
—
|
|
|
1,077.8
|
|
|
—
|
|
|
—
|
|
|
1,090.4
|
|
|
—
|
|
||||||
Residential mortgage-backed securities
|
|
—
|
|
|
480.4
|
|
|
—
|
|
|
—
|
|
|
451.5
|
|
|
—
|
|
||||||
Commercial mortgage-backed securities
|
|
—
|
|
|
105.3
|
|
|
—
|
|
|
—
|
|
|
94.3
|
|
|
—
|
|
||||||
Asset-backed securities
|
|
—
|
|
|
58.0
|
|
|
—
|
|
|
—
|
|
|
64.5
|
|
|
—
|
|
||||||
Other securities
|
|
—
|
|
|
179.5
|
|
|
—
|
|
|
—
|
|
|
149.9
|
|
|
—
|
|
||||||
Total fixed maturity securities
|
|
$
|
—
|
|
|
$
|
2,480.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,496.4
|
|
|
$
|
—
|
|
Equity securities at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Industrial and miscellaneous
|
|
$
|
246.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
174.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other
|
|
38.6
|
|
|
—
|
|
|
—
|
|
|
25.1
|
|
|
—
|
|
|
—
|
|
||||||
Total equity securities at fair value
|
|
$
|
284.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
199.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Short-term investments
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25.0
|
|
|
$
|
—
|
|
Total investments at fair value
|
|
$
|
284.7
|
|
|
$
|
2,480.8
|
|
|
$
|
—
|
|
|
$
|
199.9
|
|
|
$
|
2,521.4
|
|
|
$
|
—
|
|
|
|
Nine Months Ended
|
||||||
|
|
September 30, 2019
|
|
September 30, 2018
|
||||
Level 3 Securities:
|
|
(in millions)
|
||||||
Beginning balance, January 1
|
|
$
|
—
|
|
|
$
|
4.7
|
|
Transfers out of Level 3 (1)
|
|
—
|
|
|
(4.7
|
)
|
||
Purchases and sales, net
|
|
—
|
|
|
—
|
|
||
Ending balance, September 30
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
The transfer during the nine months ended September 30, 2018 was the result of adoption of ASU 2016-01, which specified that FHLB stock shall be carried at cost and is therefore excluded from the fair value hierarchy.
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(in millions)
|
||||||
Cash equivalents carried at NAV
|
$
|
100.2
|
|
|
$
|
57.5
|
|
Other invested assets carried at NAV
|
4.7
|
|
|
—
|
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
|
|
(in millions)
|
||||||||||||||
At September 30, 2019
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
||||||||
U.S. Treasuries
|
|
$
|
82.0
|
|
|
$
|
2.2
|
|
|
$
|
—
|
|
|
$
|
84.2
|
|
U.S. Agencies
|
|
2.7
|
|
|
0.2
|
|
|
—
|
|
|
2.9
|
|
||||
States and municipalities
|
|
464.8
|
|
|
27.9
|
|
|
—
|
|
|
492.7
|
|
||||
Corporate securities
|
|
1,035.9
|
|
|
41.9
|
|
|
—
|
|
|
1,077.8
|
|
||||
Residential mortgage-backed securities
|
|
472.6
|
|
|
8.6
|
|
|
(0.8
|
)
|
|
480.4
|
|
||||
Commercial mortgage-backed securities
|
|
100.7
|
|
|
4.6
|
|
|
—
|
|
|
105.3
|
|
||||
Asset-backed securities
|
|
56.7
|
|
|
1.3
|
|
|
—
|
|
|
58.0
|
|
||||
Other securities
|
|
179.2
|
|
|
1.1
|
|
|
(0.8
|
)
|
|
179.5
|
|
||||
Total fixed maturity securities
|
|
$
|
2,394.6
|
|
|
87.8
|
|
|
(1.6
|
)
|
|
$
|
2,480.8
|
|
At December 31, 2018
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
||||||||
U.S. Treasuries
|
|
$
|
106.7
|
|
|
$
|
0.9
|
|
|
$
|
(1.2
|
)
|
|
$
|
106.4
|
|
U.S. Agencies
|
|
11.3
|
|
|
0.1
|
|
|
—
|
|
|
11.4
|
|
||||
States and municipalities
|
|
513.4
|
|
|
15.3
|
|
|
(0.7
|
)
|
|
528.0
|
|
||||
Corporate securities
|
|
1,106.2
|
|
|
5.8
|
|
|
(21.6
|
)
|
|
1,090.4
|
|
||||
Residential mortgage-backed securities
|
|
459.1
|
|
|
2.2
|
|
|
(9.8
|
)
|
|
451.5
|
|
||||
Commercial mortgage-backed securities
|
|
96.7
|
|
|
0.1
|
|
|
(2.5
|
)
|
|
94.3
|
|
||||
Asset-backed securities
|
|
64.7
|
|
|
0.2
|
|
|
(0.4
|
)
|
|
64.5
|
|
||||
Other securities
|
|
155.6
|
|
|
—
|
|
|
(5.7
|
)
|
|
149.9
|
|
||||
Total fixed maturity securities
|
|
$
|
2,513.7
|
|
|
24.6
|
|
|
(41.9
|
)
|
|
$
|
2,496.4
|
|
||
Total short-term investments
|
|
$
|
25.0
|
|
|
—
|
|
|
—
|
|
|
$
|
25.0
|
|
|
|
Cost
|
|
Estimated Fair Value
|
||||
|
|
(in millions)
|
||||||
At September 30, 2019
|
|
|
|
|
||||
Equity securities at fair value
|
|
|
|
|
||||
Industrial and miscellaneous
|
|
$
|
171.8
|
|
|
$
|
246.1
|
|
Other
|
|
27.2
|
|
|
38.6
|
|
||
Total equity securities at fair value
|
|
$
|
199.0
|
|
|
$
|
284.7
|
|
At December 31, 2018
|
|
|
|
|
||||
Equity securities at fair value
|
|
|
|
|
||||
Industrial and miscellaneous
|
|
$
|
114.6
|
|
|
$
|
174.8
|
|
Other
|
|
17.3
|
|
|
25.1
|
|
||
Total equity securities at fair value
|
|
$
|
131.9
|
|
|
$
|
199.9
|
|
|
|
Amortized Cost
|
|
Estimated Fair Value
|
||||
|
|
(in millions)
|
||||||
Due in one year or less
|
|
$
|
131.1
|
|
|
$
|
132.1
|
|
Due after one year through five years
|
|
796.1
|
|
|
818.6
|
|
||
Due after five years through ten years
|
|
783.1
|
|
|
826.0
|
|
||
Due after ten years
|
|
54.3
|
|
|
60.4
|
|
||
Mortgage and asset-backed securities
|
|
630.0
|
|
|
643.7
|
|
||
Total
|
|
$
|
2,394.6
|
|
|
$
|
2,480.8
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||
|
|
Estimated Fair Value
|
|
Gross
Unrealized Losses |
|
Number of Issues
|
|
Estimated Fair Value
|
|
Gross
Unrealized Losses |
|
Number of Issues
|
||||||||||
|
|
(in millions, except number of issues data)
|
||||||||||||||||||||
Less than 12 months:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Treasuries
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
12.2
|
|
|
$
|
(0.1
|
)
|
|
7
|
|
States and municipalities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70.1
|
|
|
(0.7
|
)
|
|
21
|
|
||||
Corporate securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
624.4
|
|
|
(13.4
|
)
|
|
205
|
|
||||
Residential mortgage-backed securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
156.9
|
|
|
(2.5
|
)
|
|
59
|
|
||||
Commercial mortgage-backed securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30.9
|
|
|
(0.5
|
)
|
|
13
|
|
||||
Asset-backed securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25.1
|
|
|
(0.2
|
)
|
|
18
|
|
||||
Other securities
|
|
46.4
|
|
|
(0.8
|
)
|
|
125
|
|
|
137.1
|
|
|
(5.7
|
)
|
|
215
|
|
||||
Total less than 12 months
|
|
$
|
46.4
|
|
|
$
|
(0.8
|
)
|
|
125
|
|
|
$
|
1,056.7
|
|
|
$
|
(23.1
|
)
|
|
538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
12 months or greater:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Treasuries
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
72.7
|
|
|
$
|
(1.1
|
)
|
|
25
|
|
Corporate securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
193.7
|
|
|
(8.2
|
)
|
|
69
|
|
||||
Residential mortgage-backed securities
|
|
65.1
|
|
|
(0.8
|
)
|
|
28
|
|
|
199.8
|
|
|
(7.3
|
)
|
|
72
|
|
||||
Commercial mortgage-backed securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55.0
|
|
|
(2.0
|
)
|
|
22
|
|
||||
Asset-backed securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16.5
|
|
|
(0.2
|
)
|
|
17
|
|
||||
Total 12 months or greater
|
|
$
|
65.1
|
|
|
$
|
(0.8
|
)
|
|
28
|
|
|
$
|
537.7
|
|
|
$
|
(18.8
|
)
|
|
205
|
|
|
|
Gross Realized Gains
|
|
Gross Realized Losses
|
|
Change in Net Unrealized Gains (Losses)
|
|
Changes in Fair Value Reflected in Earnings
|
|
Changes in Fair Value Reflected in AOCI, before tax
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
$
|
2.3
|
|
|
$
|
(0.3
|
)
|
|
$
|
18.7
|
|
|
$
|
2.0
|
|
|
$
|
18.7
|
|
Equity securities
|
|
14.0
|
|
|
(3.0
|
)
|
|
(10.3
|
)
|
|
0.7
|
|
|
—
|
|
|||||
Other invested assets
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
(0.2
|
)
|
|
—
|
|
|||||
Cash equivalents
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|||||
Total investments
|
|
$
|
16.4
|
|
|
$
|
(3.3
|
)
|
|
$
|
8.2
|
|
|
$
|
2.6
|
|
|
$
|
18.7
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
$
|
3.9
|
|
|
$
|
(1.0
|
)
|
|
$
|
103.5
|
|
|
$
|
2.9
|
|
|
$
|
103.5
|
|
Equity securities
|
|
16.7
|
|
|
(3.9
|
)
|
|
17.7
|
|
|
30.5
|
|
|
—
|
|
|||||
Other invested assets
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
(0.2
|
)
|
|
—
|
|
|||||
Cash equivalents
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|||||
Total investments
|
|
$
|
20.7
|
|
|
$
|
(4.9
|
)
|
|
$
|
121.0
|
|
|
$
|
33.3
|
|
|
$
|
103.5
|
|
Three Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(11.6
|
)
|
|
$
|
—
|
|
|
$
|
(11.6
|
)
|
Equity securities
|
|
4.9
|
|
|
(0.5
|
)
|
|
11.2
|
|
|
15.6
|
|
|
—
|
|
|||||
Total investments
|
|
$
|
4.9
|
|
|
$
|
(0.5
|
)
|
|
$
|
(0.4
|
)
|
|
$
|
15.6
|
|
|
$
|
(11.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturity securities
|
|
$
|
2.1
|
|
|
$
|
(2.6
|
)
|
|
$
|
(70.8
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
(70.8
|
)
|
Equity securities
|
|
13.0
|
|
|
(1.1
|
)
|
|
1.8
|
|
|
13.7
|
|
|
—
|
|
|||||
Total investments
|
|
$
|
15.1
|
|
|
$
|
(3.7
|
)
|
|
$
|
(69.0
|
)
|
|
$
|
13.2
|
|
|
$
|
(70.8
|
)
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
Fixed maturity securities
|
|
$
|
20.2
|
|
|
$
|
18.8
|
|
|
$
|
60.8
|
|
|
$
|
56.5
|
|
Equity securities
|
|
2.8
|
|
|
1.5
|
|
|
6.6
|
|
|
4.8
|
|
||||
Cash equivalents and restricted cash
|
|
0.5
|
|
|
0.9
|
|
|
1.5
|
|
|
1.4
|
|
||||
Gross investment income
|
|
23.5
|
|
|
21.2
|
|
|
68.9
|
|
|
62.7
|
|
||||
Investment expenses
|
|
(1.2
|
)
|
|
(1.0
|
)
|
|
(3.4
|
)
|
|
(2.8
|
)
|
||||
Net investment income
|
|
$
|
22.3
|
|
|
$
|
20.2
|
|
|
$
|
65.5
|
|
|
$
|
59.9
|
|
|
As of September 30,
|
|
As of December 31,
|
||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Furniture and equipment
|
$
|
2.5
|
|
|
$
|
3.3
|
|
Leasehold improvements
|
6.0
|
|
|
3.2
|
|
||
Computers and software
|
66.3
|
|
|
61.9
|
|
||
Automobiles
|
1.1
|
|
|
1.1
|
|
||
Property and equipment, gross
|
75.9
|
|
|
69.5
|
|
||
Accumulated depreciation
|
(52.0
|
)
|
|
(51.3
|
)
|
||
Property and equipment, net
|
$
|
23.9
|
|
|
$
|
18.2
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
|
|
September 30, 2019
|
|
September 30, 2019
|
||||
|
|
(in millions)
|
||||||
Operating lease expense
|
|
$
|
1.3
|
|
|
$
|
3.8
|
|
Finance lease expense
|
|
0.1
|
|
|
0.2
|
|
||
Total lease expense
|
|
$
|
1.4
|
|
|
$
|
4.0
|
|
|
|
As of September 30, 2019
|
||||||
|
|
Operating Leases
|
|
Finance Leases
|
||||
|
|
(in millions)
|
||||||
2019
|
|
$
|
1.3
|
|
|
$
|
0.2
|
|
2020
|
|
4.5
|
|
|
0.2
|
|
||
2021
|
|
3.1
|
|
|
0.2
|
|
||
2022
|
|
1.9
|
|
|
—
|
|
||
2023
|
|
2.0
|
|
|
—
|
|
||
Thereafter
|
|
6.1
|
|
|
—
|
|
||
Total lease payments
|
|
18.9
|
|
|
0.6
|
|
||
Less: inputed interest
|
|
(1.8
|
)
|
|
—
|
|
||
Total
|
|
$
|
17.1
|
|
|
$
|
0.6
|
|
|
|
As of September 30, 2019
|
||
|
|
(in millions)
|
||
Operating leases:
|
|
|
||
Operating lease right-of-use asset
|
|
$
|
15.0
|
|
Operating lease liability
|
|
17.1
|
|
|
Finance leases:
|
|
|
||
Property and equipment, gross
|
|
1.1
|
|
|
Accumulated depreciation
|
|
(0.5
|
)
|
|
Property and equipment, net
|
|
0.6
|
|
|
Other liabilities
|
|
$
|
0.6
|
|
|
|
Nine Months Ended
|
||
|
|
September 30, 2019
|
||
|
|
(in millions)
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
||
Operating cash flows used for operating leases
|
|
$
|
3.8
|
|
Financing cash flows used for finance leases
|
|
0.2
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
Unpaid losses and LAE at beginning of period
|
|
$
|
2,161.8
|
|
|
$
|
2,227.9
|
|
|
$
|
2,207.9
|
|
|
$
|
2,266.1
|
|
Less reinsurance recoverable, excluding bad debt allowance, on unpaid losses and LAE
|
|
484.2
|
|
|
512.5
|
|
|
504.4
|
|
|
537.0
|
|
||||
Net unpaid losses and LAE at beginning of period
|
|
1,677.6
|
|
|
1,715.4
|
|
|
1,703.5
|
|
|
1,729.1
|
|
||||
Losses and LAE, net of reinsurance, incurred during the period related to:
|
|
|
|
|
|
|
|
|
|
|
||||||
Current period
|
|
115.4
|
|
|
121.1
|
|
|
344.8
|
|
|
342.5
|
|
||||
Prior periods
|
|
(20.2
|
)
|
|
(11.9
|
)
|
|
(66.1
|
)
|
|
(40.8
|
)
|
||||
Total net losses and LAE incurred during the period
|
|
95.2
|
|
|
109.2
|
|
|
278.7
|
|
|
301.7
|
|
||||
Paid losses and LAE, net of reinsurance, related to:
|
|
|
|
|
|
|
|
|
|
|
||||||
Current period
|
|
32.9
|
|
|
31.2
|
|
|
63.5
|
|
|
56.9
|
|
||||
Prior periods
|
|
69.7
|
|
|
71.5
|
|
|
248.5
|
|
|
252.0
|
|
||||
Total net paid losses and LAE during the period
|
|
102.6
|
|
|
102.7
|
|
|
312.0
|
|
|
308.9
|
|
||||
Ending unpaid losses and LAE, net of reinsurance
|
|
1,670.2
|
|
|
1,721.9
|
|
|
1,670.2
|
|
|
1,721.9
|
|
||||
Reinsurance recoverable, excluding bad debt allowance, on unpaid losses and LAE
|
|
527.1
|
|
|
511.8
|
|
|
527.1
|
|
|
511.8
|
|
||||
Unpaid losses and LAE at end of period
|
|
$
|
2,197.3
|
|
|
$
|
2,233.7
|
|
|
$
|
2,197.3
|
|
|
$
|
2,233.7
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(in millions)
|
||||||
Dekania Surplus Note, due April 29, 2034
|
$
|
—
|
|
|
$
|
10.0
|
|
Alesco Surplus Note, due December 15, 2034
|
—
|
|
|
10.0
|
|
||
Total
|
$
|
—
|
|
|
$
|
20.0
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
|
(in millions)
|
||||||
Net unrealized gains (losses) on investments, before taxes
|
|
$
|
86.2
|
|
|
$
|
(17.3
|
)
|
Deferred tax (expense) benefit on net unrealized gains (losses)
|
|
(18.1
|
)
|
|
3.6
|
|
||
Total accumulated other comprehensive income (loss)
|
|
$
|
68.1
|
|
|
$
|
(13.7
|
)
|
|
Number Awarded
|
|
Weighted Average Fair Value on Date of Grant
|
|
Aggregate Fair Value on Date of Grant
|
|||||
|
|
|
|
|
(in millions)
|
|||||
March 2019
|
|
|
|
|
|
|||||
RSUs(1)
|
72,060
|
|
|
$
|
40.54
|
|
|
$
|
2.9
|
|
PSUs(2)
|
95,940
|
|
|
40.54
|
|
|
3.9
|
|
||
|
|
|
|
|
|
|||||
May 2019
|
|
|
|
|
|
|||||
RSUs(3)
|
17,050
|
|
|
$
|
40.76
|
|
|
$
|
0.7
|
|
|
|
|
|
|
|
|||||
August 2019
|
|
|
|
|
|
|||||
PSUs(2)
|
9,587
|
|
|
$
|
41.72
|
|
|
$
|
0.4
|
|
(1)
|
The RSUs awarded in March 2019 were awarded to certain employees of the Company and vest 25% on March 15, 2020, and each of the subsequent three anniversaries of that date. The RSUs are subject to accelerated vesting in certain circumstances, including but not limited to: death, disability, retirement, or in connection with a change of control of the Company.
|
(2)
|
The PSUs awarded in March 2019 and August 2019 were awarded to certain employees of the Company and have a performance period of two years followed by an additional one year vesting period. The PSU awards are subject to certain performance goals with payouts that range from 0% to 200% of the target awards. The value shown in the table represents the aggregate number of PSUs awarded at the target level.
|
(3)
|
The RSUs awarded in May 2019 were awarded to non-employee Directors of the Company and vest in full on May 23, 2020.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions, except share data)
|
||||||||||||||
Net income—basic and diluted
|
|
$
|
32.8
|
|
|
$
|
47.6
|
|
|
$
|
125.4
|
|
|
$
|
115.7
|
|
Weighted average number of shares outstanding—basic
|
|
31,946,851
|
|
|
32,906,250
|
|
|
32,168,826
|
|
|
32,864,612
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
||||||||
PSUs
|
|
255,663
|
|
|
253,612
|
|
|
278,641
|
|
|
253,269
|
|
||||
Stock options
|
|
80,889
|
|
|
104,450
|
|
|
79,954
|
|
|
101,907
|
|
||||
RSUs
|
|
34,614
|
|
|
51,852
|
|
|
60,034
|
|
|
59,002
|
|
||||
Dilutive potential shares
|
|
371,166
|
|
|
409,914
|
|
|
418,629
|
|
|
414,178
|
|
||||
Weighted average number of shares outstanding—diluted
|
|
32,318,017
|
|
|
33,316,164
|
|
|
32,587,455
|
|
|
33,278,790
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
|
(in millions)
|
||||||
GAAP stockholders’ equity
|
|
$
|
1,160.4
|
|
|
$
|
1,018.2
|
|
Deferred reinsurance gain–LPT Agreement
|
|
139.4
|
|
|
149.6
|
|
||
Less: Accumulated other comprehensive income (loss), net
|
|
68.1
|
|
|
(13.7
|
)
|
||
Adjusted stockholders’ equity(1)
|
|
$
|
1,231.7
|
|
|
$
|
1,181.5
|
|
(1)
|
Adjusted stockholders’ equity is a non-GAAP measure consisting of total GAAP stockholders’ equity plus the Deferred Gain, less Accumulated other comprehensive income (loss), net.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
Gross premiums written
|
|
$
|
166.5
|
|
|
$
|
189.2
|
|
|
$
|
553.1
|
|
|
$
|
587.2
|
|
Net premiums written
|
|
$
|
165.2
|
|
|
$
|
187.3
|
|
|
$
|
549.1
|
|
|
$
|
582.5
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
|
$
|
175.8
|
|
|
$
|
192.9
|
|
|
$
|
526.1
|
|
|
$
|
547.5
|
|
Net investment income
|
|
22.3
|
|
|
20.2
|
|
|
65.5
|
|
|
59.9
|
|
||||
Net realized and unrealized gains on investments
|
|
2.6
|
|
|
15.6
|
|
|
33.3
|
|
|
13.2
|
|
||||
Other income
|
|
0.3
|
|
|
0.2
|
|
|
0.6
|
|
|
0.4
|
|
||||
Total revenues
|
|
201.0
|
|
|
228.9
|
|
|
625.5
|
|
|
621.0
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Losses and LAE
|
|
92.9
|
|
|
106.6
|
|
|
268.2
|
|
|
289.7
|
|
||||
Commission expense
|
|
21.9
|
|
|
24.8
|
|
|
67.7
|
|
|
73.1
|
|
||||
Underwriting and other operating expenses
|
|
45.3
|
|
|
38.8
|
|
|
136.6
|
|
|
118.1
|
|
||||
Interest and financing expenses
|
|
—
|
|
|
0.4
|
|
|
0.6
|
|
|
1.1
|
|
||||
Total expenses
|
|
160.1
|
|
|
170.6
|
|
|
473.1
|
|
|
482.0
|
|
||||
Income tax expense
|
|
8.1
|
|
|
10.7
|
|
|
27.0
|
|
|
23.3
|
|
||||
Net income
|
|
$
|
32.8
|
|
|
$
|
47.6
|
|
|
$
|
125.4
|
|
|
$
|
115.7
|
|
Less amortization of the Deferred Gain related to losses
|
|
$
|
1.9
|
|
|
$
|
2.1
|
|
|
$
|
7.1
|
|
|
$
|
7.8
|
|
Less amortization of the Deferred Gain related to contingent commission
|
|
0.4
|
|
|
0.5
|
|
|
1.4
|
|
|
1.5
|
|
||||
Less impact of LPT Reserve Adjustments(1)
|
|
—
|
|
|
—
|
|
|
1.8
|
|
|
2.2
|
|
||||
Less impact of LPT Contingent Commission Adjustments(2)
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.5
|
|
||||
Net income before impact of the LPT Agreement(3)
|
|
$
|
30.5
|
|
|
$
|
45.0
|
|
|
$
|
114.9
|
|
|
$
|
103.7
|
|
(1)
|
LPT Reserve Adjustments result in a cumulative adjustment to the Deferred Gain, which is recognized in losses and LAE incurred on our Consolidated Statements of Comprehensive Income, such that the Deferred Gain reflects the balance that would have existed had the revised reserves been recognized at the inception of the LPT Agreement.
|
(2)
|
LPT Contingent Commission Adjustments result in an adjustment to the Deferred Gain, which is recognized in losses and LAE incurred on our Consolidated Statements of Comprehensive Income, such that the Deferred Gain reflects the balance that would have existed had the revised contingent profit commission been recognized at the inception of the LPT Agreement.
|
(3)
|
We define net income before impact of the LPT Agreement as net income before the impact of: (a) amortization of the Deferred Gain; (b) adjustments to the LPT Agreement ceded reserves; and (c) adjustments to the Contingent commission receivable–LPT Agreement. The Deferred Gain reflects the unamortized gain from the LPT Agreement. Under GAAP, this gain is deferred and is being amortized using the recovery method in which amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries over the life of the LPT Agreement, except for the contingent profit commission, which is amortized through June 30, 2024. The amortization is reflected in losses and LAE. We periodically reevaluate the remaining direct reserves subject to the LPT Agreement and the expected losses and LAE subject to the contingent profit commission under the LPT Agreement. Our reevaluation results in corresponding adjustments, if needed, to reserves, ceded reserves, contingent commission receivable, and the Deferred Gain, with the net effect being an increase or decrease to our net income. Net income before impact of the LPT Agreement is not a measurement of financial performance under GAAP, but rather reflects a difference in accounting treatment between statutory and GAAP, and should not be considered in isolation or as an alternative to net income before income taxes or net income, or any other measure of performance derived in accordance with GAAP.
|
|
As of September 30, 2019
|
||||||||||||||||
|
Year-to-Date Change
|
|
Year-Over-Year Change
|
||||||||||||||
|
Overall
|
|
California
|
|
All Other States
|
|
Overall
|
|
California
|
|
All Other States
|
||||||
In-force premiums
|
(0.3
|
)%
|
|
(5.3
|
)%
|
|
5.5
|
%
|
|
0.4
|
%
|
|
(5.5
|
)%
|
|
7.3
|
%
|
In-force policy count
|
5.9
|
|
|
3.5
|
|
|
7.9
|
|
|
7.4
|
|
|
5.2
|
|
|
9.4
|
|
Average in-force policy size
|
(5.8
|
)
|
|
(8.5
|
)
|
|
(2.2
|
)
|
|
(6.6
|
)
|
|
(10.2
|
)
|
|
(1.9
|
)
|
In-force payroll exposure
|
13.5
|
|
|
8.6
|
|
|
16.6
|
|
|
18.8
|
|
|
15.0
|
|
|
21.1
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
State
|
|
In-force
Premiums
|
|
Policies
In-force |
|
In-force
Premiums
|
|
Policies
In-force |
|
In-force
Premiums
|
|
Policies
In-force |
|
In-force
Premiums
|
|
Policies
In-force |
||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||||||
California
|
|
$
|
338.3
|
|
|
43,465
|
|
|
$
|
357.1
|
|
|
41,988
|
|
|
$
|
358.1
|
|
|
41,335
|
|
|
$
|
349.4
|
|
|
40,573
|
|
Florida
|
|
37.0
|
|
|
5,688
|
|
|
41.0
|
|
|
5,833
|
|
|
42.0
|
|
|
5,745
|
|
|
41.8
|
|
|
5,625
|
|
||||
Other (44 states and D.C.)
|
|
289.2
|
|
|
47,747
|
|
|
268.1
|
|
|
43,677
|
|
|
262.0
|
|
|
43,110
|
|
|
235.7
|
|
|
39,296
|
|
||||
Total
|
|
$
|
664.5
|
|
|
96,900
|
|
|
$
|
666.2
|
|
|
91,498
|
|
|
$
|
662.1
|
|
|
90,190
|
|
|
$
|
626.9
|
|
|
85,494
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
|
September 30,
|
|
September 30,
|
||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Loss and LAE ratio
|
|
52.8
|
%
|
|
55.3
|
%
|
|
51.0
|
%
|
|
52.9
|
%
|
Underwriting and other operating expenses ratio
|
|
25.8
|
|
|
20.0
|
|
|
25.9
|
|
|
21.5
|
|
Commission expense ratio
|
|
12.5
|
|
|
12.9
|
|
|
12.9
|
|
|
13.4
|
|
Combined ratio
|
|
91.1
|
%
|
|
88.2
|
%
|
|
89.8
|
%
|
|
87.8
|
%
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
Prior accident year favorable loss development, net
|
|
$
|
20.2
|
|
|
$
|
11.9
|
|
|
$
|
66.1
|
|
|
$
|
40.8
|
|
Amortization of the Deferred Gain related to losses
|
|
$
|
1.9
|
|
|
$
|
2.1
|
|
|
$
|
7.1
|
|
|
$
|
7.8
|
|
Amortization of the Deferred Gain related to contingent commission
|
|
0.4
|
|
|
0.5
|
|
|
1.4
|
|
|
1.5
|
|
||||
Impact of LPT Reserve Adjustments
|
|
—
|
|
|
—
|
|
|
1.8
|
|
|
2.2
|
|
||||
Impact of LPT Contingent Commission Adjustments
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.5
|
|
||||
Total impact of the LPT on losses and LAE
|
|
2.3
|
|
|
2.6
|
|
|
10.5
|
|
|
12.0
|
|
||||
Total losses and LAE reserve adjustments
|
|
$
|
22.5
|
|
|
$
|
14.5
|
|
|
$
|
76.6
|
|
|
$
|
52.8
|
|
|
|
September 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
(in millions)
|
||||||
Cash, cash equivalents, and restricted cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
112.6
|
|
|
$
|
133.1
|
|
Investing activities
|
|
18.4
|
|
|
19.9
|
|
||
Financing activities
|
|
(92.4
|
)
|
|
(22.3
|
)
|
||
Increase in cash, cash equivalents, and restricted cash
|
|
$
|
38.6
|
|
|
$
|
130.7
|
|
|
|
Payment Due By Period
|
||||||||||||||||||
|
|
Total
|
|
Less Than
1-Year
|
|
1-3 Years
|
|
4-5 Years
|
|
More Than
5 Years
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||
Operating leases
|
|
$
|
18.9
|
|
|
$
|
4.9
|
|
|
$
|
7.3
|
|
|
$
|
3.6
|
|
|
$
|
3.1
|
|
Non-cancellable contracts
|
|
20.4
|
|
|
6.2
|
|
|
8.6
|
|
|
5.4
|
|
|
0.2
|
|
|||||
Capital leases
|
|
0.6
|
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|||||
Unpaid losses and LAE reserves (1)(2)
|
|
2,197.3
|
|
|
370.4
|
|
|
451.5
|
|
|
276.4
|
|
|
1,099.0
|
|
|||||
Unfunded investment commitments
|
|
45.1
|
|
|
45.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
|
$
|
2,282.3
|
|
|
$
|
426.9
|
|
|
$
|
467.7
|
|
|
$
|
285.4
|
|
|
$
|
1,102.3
|
|
(1)
|
Estimated losses and LAE reserve payment patterns have been computed based on historical information. Our calculation of loss and LAE reserve payments by period is subject to the same uncertainties associated with determining the level of reserves and to the additional uncertainties arising from the difficulty of predicting when claims (including claims that have not yet been reported to us) will be paid. Actual payments of losses and LAE by period will vary, perhaps materially, from the above table to the extent that current estimates of losses and LAE reserves vary from actual ultimate claims amounts due to variations between expected and actual payout patterns.
|
(2)
|
The unpaid losses and LAE reserves are presented gross of reinsurance recoverables for unpaid losses, which were as follows for each of the periods presented above:
|
|
|
Recoveries Due By Period
|
||||||||||||||||||
|
|
Total
|
|
Less Than
1-Year
|
|
1-3 Years
|
|
4-5 Years
|
|
More Than
5 Years
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||
Reinsurance recoverables on unpaid losses and LAE
|
|
$
|
(527.1
|
)
|
|
$
|
(34.5
|
)
|
|
$
|
(60.1
|
)
|
|
$
|
(54.0
|
)
|
|
$
|
(378.5
|
)
|
Rating
|
|
Percentage of Total
Estimated Fair Value
|
|
“AAA”
|
|
8.0
|
%
|
“AA”
|
|
44.6
|
|
“A”
|
|
30.5
|
|
“BBB”
|
|
10.7
|
|
Below investment grade
|
|
6.2
|
|
Total
|
|
100.0
|
%
|
Period
|
|
Total Number of Shares Purchased
|
|
Average
Price Paid
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)
|
||||||
July 1 – July 31, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
52.7
|
|
August 1 – August 31, 2019
|
|
110,632
|
|
|
42.22
|
|
|
110,632
|
|
|
48.0
|
|
||
September 1 – September 30, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
48.0
|
|
||
|
|
110,632
|
|
|
$
|
42.22
|
|
|
110,632
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference Herein
|
||||||
Exhibit
No.
|
|
Description of Exhibit
|
|
Included
Herewith
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
*10.1
|
|
|
X
|
|
|
|
|
|
|
|
|
|
31.1
|
|
|
X
|
|
|
|
|
|
|
|
|
|
31.2
|
|
|
X
|
|
|
|
|
|
|
|
|
|
32.1
|
|
|
X
|
|
|
|
|
|
|
|
|
|
32.2
|
|
|
X
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded with the Inline XBRL document.
|
|
X
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
X
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
Date:
|
October 24, 2019
|
/s/ Michael S. Paquette
|
|
|
Michael S. Paquette
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
Employers Holdings, Inc.
|
|
|
(Principal Financial and Accounting Officer)
|
1.
|
Employment.
|
2.
|
Term.
|
3.
|
Services and Duties.
|
4.
|
Compensation and Benefits.
|
(a)
|
During the Term, the Company shall pay to the Employee an annual salary of not less than $400,000 (“Base Salary”), which amount shall be paid according to the Company’s regular payroll practices. The Company agrees to review the Base Salary on an annual basis and adjust the salary to comply with the executive compensation policy in effect at the time of the review. Any adjustment made to the annual salary will establish the new Base Salary for the Employee. All payments made pursuant to this Agreement, including but not limited to this subsection 4(a), shall be reduced by and subject to withholding for all federal, state, and local taxes and any other withholding required by applicable laws and regulations.
|
(b)
|
The Company will provide an annual incentive (the “Annual Incentive”) to the Employee during the Term based on the Employee’s and the Company’s performance, as determined by the Board (or a committee
|
(c)
|
The Employee agrees that the amounts payable and benefits provided under this Agreement, including but not limited to any amounts payable or benefits provided under this Section 4 and Section 7, constitute good, valuable and separate consideration for the non-competition, assignment and release of liability provisions contained herein. The Employee acknowledges that she is aware of the effect of the non-competition, assignment and release of liability provisions contained herein and agrees that the amounts payable and benefits provided under this Agreement, including but not limited to the amounts payable and benefits provided under this Section 4 and Section 7, if any, constitute sufficient consideration for her agreement to these provisions.
|
(d)
|
In addition to the compensation called for in this Agreement, the Employee shall be entitled to receive any and all employee benefits and perquisites as the Company from time to time in its discretion determines to offer. In addition, the Employee shall be entitled to the applicable relocation and moving benefits described in Appendix A attached hereto.
|
5.
|
Insurance.
|
6.
|
Termination.
|
(a)
|
The Company, at any time, may terminate this Agreement and the Employee's employment immediately for “Cause.” Cause is defined as:
|
(i)
|
A material breach of this Agreement by the Employee;
|
(ii)
|
Failure or inability of the Employee to obtain or maintain any required licenses or certificates;
|
(iii)
|
Willful violation by the Employee of any law, rule or regulation, including but not limited to any material insurance law or regulation, which violation may, as determined by the Company, adversely affect the ability of the Employee to perform her duties hereunder or may subject the Company to liability or negative publicity; or
|
(iv)
|
Conviction or commission of or the entry of a guilty plea or plea of no contest to any felony or to any other crime involving moral turpitude.
|
(b)
|
The Employee may terminate this Agreement and her employment with the Company immediately for “Good Reason,” which shall mean the occurrence of any of the following events with respect to which the Employee has notified the Company of the existence thereof within no more than ninety (90) days of the initial
|
(i)
|
A material diminution in the Employee’s base compensation;
|
(ii)
|
A material diminution in the Employee’s authority, duties or responsibilities; or
|
(iii)
|
Any other action or inaction that constitutes a material breach by the Company of this Agreement.
|
(c)
|
The Company may also terminate this Agreement and the Employee's employment upon the occurrence of one or more of the following events or reasons, subject to applicable law (or, in the case of subsection 6(c)(i) below, termination of this Agreement and the Employee's employment will be automatic):
|
(i)
|
Death of the Employee;
|
(ii)
|
The Employee is deemed to be disabled in accordance with the policies of the Company or the law or if the Employee is unable to perform the essential job functions of the Employee’s position with the Company, with or without reasonable accommodation, for a period of more than 100 business days in any 120 consecutive business day period. The Employee is entitled to any and all short term or long term disability programs, like any other employee, in accordance with the terms of such programs and the policies of the Company; or
|
(iii)
|
At any time for any other reason or no reason in the sole and absolute discretion of the Company.
|
7.
|
Payments Upon Termination.
|
(a)
|
Qualifying Termination and Severance Pay. If the Company terminates the Employee's employment prior to the expiration of the Term but other than during the CIC Period (as defined below) for any reason other than as specified above in subsection 6(a) for Cause, subsection 6(c)(i) by reason of the death of the Employee, or subsection 6(c)(ii) for disability, or if the Employee terminates her employment for Good Reason pursuant to subsection 6(b), the Employee shall receive the following severance pay (the “Severance Pay”):
|
(i)
|
In lieu of any further salary payments to the Employee for periods subsequent to the Termination Date and in lieu of any severance benefit otherwise payable to the Employee, an amount equal to two (2) times Base Salary, payable in equal bi-weekly installments on the Company’s regular payroll dates as in effect on the Termination Date, for twenty four (24) months following such Termination Date, with payments commencing on the payroll date applicable to the first full payroll period occurring following the Applicable Release Period (as defined below), which first payment date shall be no later than sixty (60) days following the Termination Date; provided, however, that (A) such payments shall be delayed to the extent required under subsection 7(c)(iv) or Section 26 below and (B) the amount of the first payment shall be equal to the total amount of bi-weekly installments that would have been paid had the first payment been made on the first full payroll date occurring following the Termination Date, with each subsequent payment equal to the bi-weekly installment. The payments shall be subject to normal payroll deductions.
|
(ii)
|
Continuation of the medical, dental and vision insurance coverage in effect on the Termination Date for a period of eighteen (18) months following the Termination Date with the Company paying the employer portion of the premium and the Employee paying the employee portion, including dependents if applicable, of the premium during such eighteen (18) month period, provided that the Employee elects to continue such insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (“COBRA”). The Employee is solely responsible for taking the actions necessary to exercise her rights under COBRA for the insurance coverage the Employee has in effect, including coverage for dependents if applicable, on the Termination Date.
|
(b)
|
Severance Pay as Liquidated Damages. The parties agree, in the event of a material breach of this Agreement by the Company with respect to which the Employee has given notice and that is not cured, in either case, in accordance with subsection 6(b), following which the Employee terminates her employment for Good Reason, that actual damages are speculative and that the amount of the Severance Pay or, if applicable, the CIC Severance Pay (as defined below) set forth herein is liquidated damages and is a reasonable estimate of what damages would be for a material breach of this Agreement.
|
(c)
|
Conditions to Severance Pay or CIC Severance Pay; the Applicable Release Period. The Employee agrees and acknowledges that the following must be satisfied by the Employee before she is entitled to the Severance Pay or, if applicable, the CIC Severance Pay, as provided in subsections (i), (ii) and (iii) herein:
|
(i)
|
That the Employee returns any and all equipment, software, data, property and information of the Company or the Company Affiliates, including documents and records or copies thereof relating in any way to any proprietary information of the Company or any of the Company Affiliates whether prepared by the Employee or any other person or entity. That the Employee further agrees that she shall not retain any proprietary information of the Company or any of the Company Affiliates after the Termination Date;
|
(ii)
|
That the Employee executes a separation agreement and release of claims, in a form to be determined by the Company in its sole discretion, which releases the Company and the Company Affiliates from liability for any and all claims, complaints and causes of action, whether based in law or equity, arising from, related to or associated with the Employee’s employment by the Company or under this Agreement and that such release has become effective and non-revocable no later than sixty (60) days following the Termination Date (such deadline, the “Release Deadline”). If the release of claims does not become effective by the Release Deadline, the Employee will forfeit any rights to severance or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the release of claims becomes effective and irrevocable. That the Employee further acknowledges and agrees that she has not made and will not make any assignment of any claim, cause or right of action, or any right of any kind whatsoever, arising from, related to or associated with the employment of the Employee by the Company; and
|
(iii)
|
That the Employee reaffirms the covenants contained herein, in writing, including, but not limited to, the covenants set forth in Section 10.
|
(iv)
|
Notwithstanding anything in this Agreement to the contrary, in any case where the first and last days of the applicable release and nonrevocability periods provided for in the separation agreement and release of claims (the “Applicable Release Period”) are in two separate taxable years, any payments required to be made to the Employee under this Agreement that are treated as deferred compensation for purposes of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and guidance promulgated thereunder (“Section 409A”) shall be made in the later taxable year, as soon as practicable, but in no event later than thirty (30) days following the conclusion of the Applicable Release Period. In addition to the foregoing, the Applicable Release Period shall conclude no later than sixty (60) days following the Termination Date.
|
(d)
|
Voluntary Termination by the Employee. The Employee may terminate her employment and this Agreement for reasons other than those identified in subsection 6(b) upon not less than sixty (60) days prior written notice. If the Employee terminates her employment and this Agreement pursuant to this subsection 7(d), she shall be entitled only to the following:
|
(i)
|
Any unpaid salary through the Termination Date; and
|
(ii)
|
Payment for any accrued and unused vacation as of the Termination Date.
|
(e)
|
Qualifying Change in Control Termination. If, before the expiration of the Term, the Company terminates the Employee's employment within the period commencing six (6) months prior to and ending eighteen (18) months following a Change in Control (as defined below), such period referred to herein as the “CIC Period,” for any reason other than as specified above in subsection 6(a) for Cause, subsection 6(c)(i) for the death of the Employee, or subsection 6(c)(ii) for disability, or if the Employee terminates her employment and this Agreement for Good Reason pursuant to subsection 6(b), the Employee shall receive the severance pay set forth in subsections (i) and (ii) below (the “CIC Severance Pay”), provided that if the Employee’s employment is terminated during the six (6) month period prior to a Change in Control, the Employee shall be entitled to CIC Severance Pay only if such termination (x) was by the Company other than for Cause but at the request or direction of any person that has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (y) was by the Employee for Good Reason and the circumstance or event that constitutes Good Reason occurred at the request or direction of such person or (z) was by the Company without Cause and the Employee reasonably demonstrates that such termination was otherwise in connection with or in anticipation of a Change in Control; and if the Employee is not entitled to CIC Severance Pay hereunder, then the Employee's termination of employment will not be deemed to have occurred during the CIC Period for purposes of subsection 7(a):
|
(i)
|
In lieu of any further salary payments to the Employee for periods subsequent to the Termination Date and in lieu of any severance benefit otherwise payable to the Employee, a lump sum cash payment equal to two (2) times the sum of (A) Base Salary and (B) (i) if the Change in Control occurs in 2019 or 2020, $220,000, and (ii) if the Change in Control occurs in 2021, the average of $220,000 and the annual bonus amount earned by the Employee for 2020. Such payment shall be made as soon as practicable (but in no event later than sixty (60) days) following the Termination Date; provided, however, that such payment shall be delayed to the extent required under subsection 7(c)(iv) or Section 26 below; and
|
(ii)
|
Continuation of the medical, dental and vision insurance coverage in effect on the Employee's Termination Date for a period of eighteen (18) months following the Termination Date with the Company paying the employer portion of the premium and the Employee paying the employee portion, including dependents if applicable, of the premium during such eighteen (18)-month period, provided that the Employee elects to continue such insurance coverage under COBRA. The Employee is solely responsible for taking the actions necessary to exercise her rights under COBRA
|
(f)
|
Definition of Change in Control. For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:
|
(i)
|
Any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company; or
|
(ii)
|
Any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 35% or more of the total voting power of the stock of the Company; or
|
(iii)
|
A majority of members of the Board is replaced during any twelve (12)-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or
|
(iv)
|
Any one person or group acquires (or has acquired during the immediately preceding twelve (12)-month period ending on the date of the most recent acquisition) assets of the Company with an aggregate gross fair market value of not less than forty percent (40%) of the aggregate gross fair market value of the assets of the Company immediately prior to such acquisition. For this purpose, gross fair market value shall mean the fair value of the affected assets determined without regard to any liabilities associated with such assets.
|
(g)
|
No Duplication of Payments or Benefits. Notwithstanding any provision of this Agreement to the contrary, the Employee shall not be eligible to receive any payments or benefits under both subsections 7(a) and 7(e); but rather, to the extent the conditions set forth in subsection 7(a) and subsection 7(e) are satisfied, the Employee shall be eligible to receive payments and benefits under only subsection 7(e).
|
(h)
|
Golden Parachute (Section 280G) Safe Harbor.
|
(i)
|
If it is determined that any payment or benefit received or to be received by the Employee, whether pursuant to this Agreement or otherwise (the “Severance Payments”), is a “parachute payment” within the meaning of section 280G of the Code (all such payments and benefits, including the Severance Payments as applicable hereinafter called the “Total Payments”) that will be subject (in whole or part) to the tax imposed under section 4999 of the Code (the “Excise Tax”), then if (A) the Total Payments exceed the largest amount that would result in no portion of the Total Payments being subject to the Excise Tax (the “Safe Harbor”), and (B) the reduction of the Total Payments to an amount equal to the Safe Harbor would provide the Employee with a greater after-tax amount than would be provided to the Employee if the Total Payments were not reduced, then the amounts payable to the Employee under this Agreement shall be reduced (but not below zero) to the Safe Harbor. If the Severance Payments are reduced pursuant to this subsection, then the non-cash portion of the Total Payments shall first be reduced, and the cash portion of the Total Payments shall thereafter be reduced (in each case in reverse order beginning with payments or benefits that are to be paid or provided the farthest in time from the Change in Control), so that the amount of the Total Payments is equal to the Safe Harbor. Any reduction pursuant to the preceding sentence shall take precedence over the provisions of any other plan, program, agreement or arrangement governing the Employee’s rights and entitlements to any benefits or compensation.
|
(ii)
|
For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”) selected by the Board in existence immediately prior to the Change in Control, does not constitute a “parachute payment” within the meaning of section 280G(b)(2) of the Code, including by reason of section 280G(b)(4)(A) of the Code, (B) the Severance Payments shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clause (A)) in their entirety constitute reasonable compensation for services
|
(iii)
|
In the event that a change is finally determined to be required in the amount of taxes paid by, or withheld on behalf of, the Employee, then appropriate adjustments will be made under this Agreement such that the net amount that is payable to the Employee reflects the intent of the parties pursuant to this Agreement. If the Company owes the Employee an additional payment under this subsection, such payment shall be made to the Employee promptly, but in no event more than sixty (60) days following the date the underpayment is finally determined, but no later than the calendar year following the calendar year in which the underpayment is finally determined. If the Employee owes an amount to the Company pursuant to this Section, then the Employee shall repay such amount to the Company promptly, but in no event more than sixty (60) days following the date that the overpayment by the Company is finally determined, but no later than the calendar year following the calendar year in which the overpayment is finally determined. Any repayment pursuant to this subsection (either by the Company or the Employee) shall include applicable interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code.
|
(iv)
|
The Employee and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. The Company also shall pay to the Employee all legal fees and expenses incurred by the Employee in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within sixty (60) business days after delivery of the Employee's written request for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require (but in no event shall any such payment be made after the end of the calendar year following the calendar year in which the expenses were incurred), provided that no such payment shall be made in respect of fees or expenses incurred by the Employee after the later of the tenth (10th) anniversary of the effective date of the Employee's termination with the Company or the Employee's death and, provided further, that, upon the Employee’s “separation from service” (as such term is defined under Section 409A) with the Company, in no event shall any additional such payments be made prior to the date that is six (6) months after the date of the Employee’s “separation from service” to the extent such payment delay is required under section 409A(a)(2)(B) of the Code.
|
8.
|
Licensing.
|
9.
|
Rules and Regulations.
|
10.
|
Restrictive Covenants.
|
(a)
|
Non-Competition. The Employee understands and agrees that the Company and the Company Affiliates do business throughout the State of Nevada and other states. The Employee further understands and agrees that
|
(b)
|
Non-Solicitation. Without limiting the generality of the foregoing, the Employee agrees that for a period of eighteen (18) months following the Employee's Termination Date (for any reason, by either the Employee or the Employer), she will not, without the prior written consent of the Company, directly or indirectly solicit or attempt to solicit, within the Non-Compete Area, (i) any business from any person or entity that the Company or any of the Company Affiliates called upon, solicited, or conducted business with as of such Termination Date, provided that the Employee was aware of the Company’s business with such person or entity, (ii) any persons or entities that have been customers of the Company or any of the Company Affiliates or (iii) recruit or solicit any person who has been or is an employee of the Company or any of the Company Affiliates, during the preceding one (1)-year period from the Termination Date. Nothing in this Section 10(b) prohibits the Employee from the placement of general advertisements and/or participation at job fairs or recruiting workshops that are not specifically targeted toward any employee or customer of the Company.
|
(c)
|
In the event the Employee violates subsection 10(a) or 10(b), the applicable period of time during which the respective restriction applies will automatically be extended for the period of time from which the Employee began such violation until she permanently ceases such violation. If any provision of these covenants is invalid in whole or in part, it will be limited, whether as to time, area covered, or otherwise as and to the extent required for its validity under the applicable law and as so limited, will be enforceable.
|
(d)
|
Confidential Information. The Employee acknowledges that she has had or will have access to the confidential information of the Company and the Company Affiliates (including, but not limited to, records regarding sales, price and cost information, marketing plans, customer names, customer lists, sales techniques, distribution plans or procedures, and other material relating to the business conducted by the Company and the Company Affiliates), proprietary, or trade secret information (the “Confidential Information”), and agrees, subject to her right to engage in Protected Activity as defined herein, never to use the Confidential Information other than for the sole benefit of the Company and the Company Affiliates and further agrees to never disclose such Confidential Information (except as may be required by regulatory authorities or as may be required by law) to any entity or person that is not an officer of the Company or a Company Affiliate at the time of such disclosure, without the prior written consent of the Company. The Employee further acknowledges that this covenant to maintain Confidential Information is necessary to protect the goodwill and proprietary interests of the Company and the Company Affiliates and the restriction against the disclosure of Confidential Information is reasonable in light of the consideration and other value the Employee has received or will receive pursuant to this Agreement and otherwise pursuant to her employment by the Company.
|
(e)
|
From and following the Employee's termination of employment, the Employee agrees to cooperate with the Company and the Company Affiliates in any litigation, administrative proceeding, investigation or audit involving any matters with which the Employee has knowledge of from her employment with the Company. The Company shall reimburse the Employee for reasonable expenses, including reasonable compensation for services rendered at his hourly rate of compensation as of the Termination Date, incurred in providing such assistance and approved by the Company. The Company shall reimburse the Employee for such expenses incurred in accordance with the policies and procedures of the Company, but in no event no later than the end of the year following the year in which the expenses were incurred.
|
(f)
|
In the event of a violation of this Section 10, the Company and the Company Affiliates shall be entitled to any form of relief at law or equity, and the parties agree and acknowledge that injunctive relief is an appropriate, but not exclusive, remedy to enforce the provisions hereof. The existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense of the Company’s enforcement of the covenants set forth in this Section 10. The Employee hereby submits to the jurisdiction of the courts of the State of Nevada and federal courts therein for the purposes of any actions or proceedings instituted by the Company to enforce its rights under this Agreement, to seek money damages or seek injunctive relief. The Employee further acknowledges and agrees (i) that the obligations contained in Section 10 of this Agreement are necessary to protect the interests
|
(g)
|
The Employee acknowledges that it is possible that the corporate structure of the Company could change during the Term. The Employee hereby acknowledges and affirms that the Company may assign its rights under this Agreement, including but not limited to its rights to enforce the covenants set forth in this Section 10, to a third-party without the approval of or additional consideration to the Employee. The Employee acknowledges and agrees that the consideration called for herein is good and sufficient consideration for the Company's right to assign its rights under this Agreement.
|
(h)
|
Subsections 10(a) through (g), inclusive, of this Agreement shall survive either termination of the employment relationship and/or termination of this Agreement for the full period set forth in subsections 10(a) through (g), inclusive.
|
11.
|
Work for Hire.
|
12.
|
Assignment of Agreement.
|
13.
|
Indemnification of the Employee.
|
14.
|
Notices.
|
15.
|
Severability.
|
16.
|
Remedy for Breach.
|
17.
|
Mitigation of Damages.
|
18.
|
Attorneys' Fees and Costs.
|
19.
|
Integration, Amendment, and Waiver.
|
20.
|
Captions.
|
21.
|
Applicable Law.
|
22.
|
Arbitration.
|
23.
|
Authorization.
|
24.
|
Acknowledgment.
|
25.
|
Protected Activity Not Prohibited.
|
COMPANY:
|
|
EMPLOYEE:
|
||
By:
|
/S/ Douglas D. Dirks
|
|
By:
|
/S/ Katherine H. Antonello
|
|
Name: Douglas D. Dirks
|
|
|
Name: Katherine H. Antonello
|
•
|
Movement of household goods and automobiles from your current residence or other real estate in lieu of your current home through a professional mover including packing, unpacking and professional storage of household goods for up to six (6) months, in an aggregate amount not to exceed $25,000;
|
•
|
Reimbursement of an airline trip to prepare for/supervise movement of goods;
|
•
|
Reimbursement of two house-hunting trips for you and one other person up to four days per trip;
|
•
|
Reimbursement of reasonable expenses necessary to complete your move, such as airfare for you and your family, hotel costs and meals for the trip from your current residence;
|
•
|
Reimbursement of temporary housing living expenses (rent, deposit, utilities) up to 6 months;
|
•
|
If as a result of your relocation to the Reno, Nevada area, you choose to sell your current home in Boca Raton, Florida, or other real estate in lieu of your current home, the Company will pay realtor fees (not to exceed six percent (6%) of the sales price) and closing costs for the sale of your current house or other real estate in lieu of your current home, in the aggregate up to $45,000;
|
•
|
If as a result of your relocation to the Reno, Nevada area, you choose to buy a home in the Reno, Nevada area, the Company will reimburse you for standard closing costs (excluding financing related costs) for the purchase of a home in the Reno area;
|
•
|
Should your family remain in Boca Raton, Florida during your transition to Reno, Nevada the Company will provide airfare or reimbursement for two (2) trips for you to Boca Raton per month, not to exceed six (6) months from your start date, or alternatively, will provide you with a lump sum payment of $6,000.
|
•
|
To the extent that the reimbursement of any of the relocation expenses results in taxable income to you (after taking into account any and all offsetting deductions), the Company will pay you an additional amount (the “Relocation Gross-Up”) such that the net after-tax amount of the reimbursement of the Relocation Expenses and the Relocation Gross-Up (at your then-current combined state and federal marginal income tax rates, taking into account the deductibility of state and local income taxes for federal income tax purposes and all other applicable deductions) is equal to the Relocation Expenses. Notwithstanding the foregoing, the Relocation Gross-Up shall not exceed $65,000. The Company will not gross-up any income associated with any profit resulting from the sale of your current house or other real estate in lieu of your current home. Any tax gross-up payment will be paid to you no later than the end of the taxable year next following the taxable year in which you remit the related taxes.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Employers Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
|
Date:
|
October 24, 2019
|
/s/ Douglas D. Dirks
|
|
|
Douglas D. Dirks
|
|
|
President and Chief Executive Officer
|
|
|
Employers Holdings, Inc.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Employers Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
|
Date:
|
October 24, 2019
|
/s/ Michael S. Paquette
|
|
|
Michael S. Paquette
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
Employers Holdings, Inc.
|
|
|
(Principal Financial and Accounting Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
Date:
|
October 24, 2019
|
/s/ Douglas D. Dirks
|
|
|
Douglas D. Dirks
|
|
|
President and Chief Executive Officer
|
|
|
Employers Holdings, Inc.
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
Date:
|
October 24, 2019
|
/s/ Michael S. Paquette
|
|
|
Michael S. Paquette
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
Employers Holdings, Inc.
|
|
|
(Principal Financial and Accounting Officer)
|