Employers Holdings, Inc. Reports Second Quarter 2020 Results; Declares Third Quarter 2020 Cash Dividend of $0.25 per Share

 Company to Host Conference Call on Friday, July 24, 2020, at 11:30 a.m. Eastern Daylight Time

RENO, Nev.--(BUSINESS WIRE)--Employers Holdings, Inc. (the “Company”) (NYSE:EIG), a holding company with subsidiaries that are specialty providers of workers' compensation insurance and services focused on select, small businesses engaged in low-to-medium hazard industries, today reported financial results for its second quarter ended June 30, 2020.

Financial Highlights

• Net income of $59.6 million, or $1.97 per diluted share;
• Adjusted net income of $25.7 million, or $0.85 per diluted share;
• Net realized and unrealized gains on investments recorded through the income statement of $39.7 million;
• Net investment income of $19.9 million, down 7% year-over-year;
• Net premiums earned of $151.5 million, down 14% year-over-year;
• Favorable prior year loss reserve development on voluntary business of $23.5 million, versus $24.0 million a year ago;
• The Company repurchased 1,033,048 shares of its common stock at an average price of $29.76 per share;
• Book value per share including the Deferred Gain of $43.43, up 11% for the quarter including dividends declared.

Management Commentary

Chief Executive Officer Douglas Dirks commented: “During the second quarter we delivered an 8.9% annualized return on adjusted equity, a terrific result given the disruption being experienced throughout the U.S. attributable to the COVID-19 pandemic. Although our operating results were solid for the second quarter, our top line was adversely impacted by a decrease in new business premium, a reduction in estimated final audit premium and additional, but moderating, premium-reducing midterm endorsements.

New business writings were down sharply in April and May, driven by lower submission volume, but rebounded nicely in June. For June, new business submissions were up 5% and new policies bound were up 14%, each year-over-year. We are hopeful that this is a strong sign that our targeted businesses have successfully reopened and are resuming their operations, and that the significant investments we have made in delivering a superior customer experience for our agents and insureds are contributing to growth in our business in an unprecedentedly challenging time. Notably, the positive results we observed in June have not yet been observed in California, although the year-over-year changes in submissions, new policies bound and bound premium in California were less negatively impacted in June than in the first two months of the quarter.”

Mr. Dirks continued, “Our balance sheet and income statement were each favorably impacted by $120 million of pretax investment gains arising during the quarter, thanks to the strong recovery in the financial markets. We were also very successful in terms of managing our capital. During the quarter we repurchased $31 million of our common stock and, year-to-date, we have returned $92 million to our shareholders through share repurchases and regular quarterly dividends. Our balance sheet and capital position remain strong and supportive of our aggressive business objectives.”

The Company has been fully functional since we closed all of our buildings to employees and the general public on March 20, 2020, and we have remained in work-from-home mode in order to protect the safety and well-being of our employees, their families and our stakeholders.”

Summary of Second Quarter 2020 Operating Results

(All comparisons vs. second quarter 2019, unless noted otherwise).

Gross premiums written were $140.2 million, a decrease of 21%. The decrease was primarily due to declines in new business writings, particularly in California, a reduction in estimated final audit premiums and processed premium-reducing midterm endorsements. Net premiums earned were $151.5 million, a decrease of 14% year-over-year.

Losses and loss adjustment expenses were $73.1 million, a decrease of 16%. The Company recognized $23.5 million of favorable prior year loss reserve development on voluntary business during the current period versus $24.0 million of favorable prior year loss reserve development a year ago.

Commission expenses were $19.2 million, a decrease of 19%. The decrease was primarily due to the decrease in earned premiums.

Underwriting and general and administrative expenses were $44.8 million, an increase of 2%. The increase was largely the result of higher premium taxes, assessments and insurance licensing fees, partially offset by lower information technology expenses.

Net investment income was $19.9 million, a decrease of 7%. The decrease was primarily due to an increase in the amortization of bond premiums associated with the Company’s residential mortgage-backed securities, which resulted from an acceleration in near-term mortgage loan prepayment speed assumptions.

Income tax expense was $14.7 million (20% effective rate) versus $9.0 million (18% effective rate). The increase in the effective rate was due primarily to having a higher proportion of fully taxable income in the current period versus the proportion of fully taxable income a year ago.

The Company’s book value per share of $38.93 and book value per share including the Deferred Gain of $43.43 increased by 13% and 11% during the second quarter of 2020, respectively, each computed after taking into account dividends declared. These measures were favorably impacted during the current period by $25.4 million of net after tax unrealized gains arising from equity securities and other investments (which are reflected on the income statement) and $69.3 million of after tax unrealized gains arising from fixed maturity securities (which are reflected on the balance sheet).

Summary of Results by Segment

(see page 14 of the Financial Supplement for a description of our reportable segments. All comparisons vs. second quarter 2019, unless noted otherwise).

Employers Segment

The Employers segment reported net income before income taxes of $75.5 million versus $50.3 million.

Highlights included the following:

- Underwriting income of $18.2 million versus $23.3 million;

- Combined ratio of 88.0% versus 86.8%;

- Current accident year loss and LAE ratio of 65.5% versus 66.2%;

- Favorable prior year loss reserve development of 15.6 percentage points versus 13.5 percentage points;

- Underwriting expense ratio of 25.4% versus 20.5%;

- Net investment income of $18.8 million versus $20.3 million; and

- Net realized and unrealized gains on investments recorded through the income statement of $38.2 million versus $6.9 million.

Cerity Segment

The Cerity segment reported a net loss before income taxes of $2.0 million versus $4.1 million, and an underwriting loss of $4.2 million versus $4.1 million.

Corporate and Other

Corporate and Other activities reported net income before income taxes of $0.8 million versus $3.5 million.

Highlights included the following:

- LPT amortization, which served to reduce losses and LAE, of $2.5 million versus $5.7 million;

- Net investment income of $0.2 million versus $1.1 million;

- Net realized and unrealized gains on investments recorded through the income statement of $0.2 million versus $0.5 million; and

- General and administrative expenses of $2.1 million versus $3.8 million.

Share Repurchases and Third Quarter 2020 Dividend Declaration

During the second quarter of 2020, the Company repurchased 1,033,048 shares of its common stock at an average price of $29.76 per share. During the period from July 1, 2020 through July 22, 2020, the Company repurchased a further 111,899 shares of its common shares at an average price of $29.21 per share.

On July 22, 2020, the Board of Directors authorized a $50.0 million expansion to its existing share repurchase program and extended the repurchase authority pursuant to the expanded program through September 30, 2021. As a result of this action, the Company currently has a remaining share repurchase authorization of $51.8 million.

On July 22, 2020, the Board of Directors declared a third quarter 2020 dividend of $0.25 per share. The dividend is payable on August 19, 2020 to stockholders of record as of August 5, 2020.

Earnings Conference Call and Webcast

The Company will host a conference call on Friday, July 24, 2020 at 11:30 a.m. Eastern Daylight Time / 8:30 a.m. Pacific Daylight Time. To participate in the live conference call by telephone, dial [phone] or [phone] and use the conference call access code 4173417.

The webcast will be accessible on the Company’s web site at www.employers.com through the “Investors” link.

An archived version of the webcast will remain on the Company’s web site for up to seven days following the live call. To listen to a recording of the call by telephone, dial [phone] or [phone] and use the conference call access code 4173417.

Reconciliation of Non-GAAP Financial Measures to GAAP

The information in this press release should be read in conjunction with the Financial Supplement that is attached to this press release and is available on our website.

Within this earnings release we present various financial measures, some of which are “Non-GAAP financial measures” as defined in Regulation G pursuant to Section 401 of the Sarbanes - Oxley Act of 2002. A description of these Non-GAAP financial measures, as well as a reconciliation of such Non-GAAP measures to our most directly comparable GAAP financial measures is included in the attached Financial Supplement. Management believes that these Non-GAAP measures are important to the Company's investors, analysts and other interested parties who benefit from having an objective and consistent basis for comparison with other companies within our industry. Management further believes that these measures are more relevant than comparable GAAP measures in evaluating our financial performance.

Forward-Looking Statements

In this press release, the Company and its management discuss and make statements based on currently available information regarding their intentions, beliefs, current expectations, and projections of, among other things, the Company's future performance, business growth, retention rates, loss costs, claim trends and the impact of key business initiatives, future technologies and planned investments. Certain of these statements may constitute “forward-looking” statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often identified by words such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “target,” “project,” “intend,” “believe,” “estimate,” “predict,” “potential,” “pro forma,” “seek,” “likely,” or “continue,” or other comparable terminology and their negatives. The Company and its management caution investors that such forward-looking statements are not guarantees of future performance. Risks and uncertainties are inherent in the Company’s future performance. Factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements include, among other things, those discussed or identified from time to time in the Company’s public filings with the U.S. Securities and Exchange Commission (the “SEC”), including the risks detailed in the Company's Quarterly Reports on Form 10-Q and the Company's Annual Reports on Form 10-K. Except as required by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Filings with the SEC

The Company’s filings with the SEC and its quarterly investor presentations can be accessed through the “Investors” link on the Company's website, www.employers.com. The Company’s filings with the SEC can also be accessed through the SEC's EDGAR Database at www.sec.gov (EDGAR CIK No. 0001379041).

About Employers Holdings, Inc.

EMPLOYERS® and America’s small business insurance specialist® are registered trademarks of EIG Services, Inc. Employers Holdings, Inc. is a holding company with subsidiaries that are specialty providers of workers' compensation insurance and services focused on select, small businesses engaged in low-to-medium hazard industries. The Company operates throughout the United States, with the exception of four states that are served exclusively by their state funds. Insurance is offered through Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Preferred Insurance Company, Employers Assurance Company and Cerity Insurance Company, all rated A- (Excellent) by the A.M. Best Company. Not all companies do business in all jurisdictions. See www.employers.com and www.cerity.com for coverage availability.

Employers Holdings, Inc.

Second Quarter 2020

Financial Supplement

EMPLOYERS HOLDINGS, INC. Table of Contents
Page
1	Consolidated Financial Highlights
2	Summary Consolidated Balance Sheets
3	Summary Consolidated Income Statements
4	Net Income Before Income Taxes by Segment
5	Return on Equity
6	Roll-forward of Unpaid Losses and LAE
7	Consolidated Investment Portfolio
8	Book Value Per Share
9	Earnings Per Share
10	Non-GAAP Financial Measures
11	Description of Reportable Segments

EMPLOYERS HOLDINGS, INC. Consolidated Financial Highlights (unaudited) $ in millions, except per share amounts
	Three Months Ended											Six Months Ended
	June 30,											June 30,
	2020			2019			% change		2020			2019			% change
Selected financial highlights:
Gross premiums written	$	140.2		$	176.6		(21	)%	$	324.9		$	386.6		(16	)%
Net premiums written		139.0			175.2		(21	)		322.4			383.9		(16	)
Net premiums earned		151.5			175.5		(14	)		319.4			350.3		(9	)
Net investment income		19.9			21.4		(7	)		39.8			43.2		(8	)
Net income before impact of the LPT^(1)		57.1			35.0		63			19.8			84.4		(77	)
Adjusted net income^(1)		25.7			29.2		(12	)		36.7			60.1		(39	)
Net income before income taxes		74.3			49.7		49			29.0			111.6		(74	)
Net income		59.6			40.7		46			24.7			92.6		(73	)
Comprehensive income		123.0			70.4		75			64.4			159.6		(60	)
Total assets										4,004.0			3,954.3		1
Stockholders' equity										1,144.0			1,121.5		2
Stockholders' equity including the Deferred Gain^(2)										1,276.2			1,263.2		1
Adjusted stockholders' equity^(2)										1,171.2			1,209.9		(3	)
Annualized adjusted return on stockholders' equity^(3)		8.9	%		9.7	%	(8	)%		6.1	%		10.1	%	(40	)
Amounts per share:
Cash dividends declared per share	$	0.25		$	0.22		14	%	$	0.50		$	0.44		14	%
Earnings per diluted share^(4)		1.97			1.25		58			0.80			2.84		(72	)
Earnings per diluted share before impact of the LPT^(4)		1.89			1.08		75			0.62			2.59		(76	)
Adjusted earnings per diluted share^(4)		0.85			0.90		(6	)		1.18			1.84		(36	)
Book value per share^(2)										38.93			35.15		11
Book value per share including the Deferred Gain^(2)										43.43			39.59		10
Adjusted book value per share^(2)										39.86			37.92		5
Financial information by Segment^(5):
Net income (loss) before income taxes
Employers	$	75.5		$	50.3		50	%	$	37.8		$	114.2		(67	)%
Cerity		(2.0	)		(4.1	)	(51	)		(6.7	)		(7.6	)	12
Corporate and Other		0.8			3.5		(77	)		(2.1	)		5.0		(142	)

(1)	See Page 3 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures.
(2)	See Page 11 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures.
(3)	See Page 8 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures.
(4)	See Page 12 for description and calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures.
(5)	See Pages 4-7 for details and Page 14 for a description of our reportable segments.

EMPLOYERS HOLDINGS, INC. Summary Consolidated Balance Sheets (unaudited) $ in millions, except per share amounts
	June 30, 2020			December 31, 2019
ASSETS Investments, cash and cash equivalents	$	2,882.9		$	2,933.6
Accrued investment income		16.2			16.4
Premiums receivable, net		284.2			285.7
Reinsurance recoverable, net of allowance, on paid and unpaid losses and LAE		530.8			539.7
Deferred policy acquisition costs		49.3			47.9
Contingent commission receivable—LPT Agreement		13.2			13.2
Other assets		227.4			167.6
Total assets	$	4,004.0		$	4,004.1
LIABILITIES
Unpaid losses and LAE	$	2,170.7		$	2,192.8
Unearned premiums		341.5			337.1
Commissions and premium taxes payable		48.5			48.6
Deferred Gain		132.2			137.1
FHLB Advances^(1)		35.0			—
Other liabilities		132.1			122.7
Total liabilities	$	2,860.0		$	2,838.3
STOCKHOLDERS' EQUITY
Common stock and additional paid-in capital	$	399.8		$	397.0
Retained earnings		1,167.8			1,158.8
Accumulated other comprehensive income, net		105.0			65.3
Treasury stock, at cost		(528.6	)		(455.3	)
Total stockholders’ equity		1,144.0			1,165.8
Total liabilities and stockholders’ equity	$	4,004.0		$	4,004.1
Stockholders' equity including the Deferred Gain ^(2)	$	1,276.2		$	1,302.9
Adjusted stockholders' equity ^(2)		1,171.2			1,237.6
Book value per share ^(2)	$	38.93		$	37.18
Book value per share including the Deferred Gain^(2)		43.43			41.55
Adjusted book value per share ^(2)		39.86			39.47

(1)	FHLB = Federal Home Loan Bank
(2)	See Page 11 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures.

EMPLOYERS HOLDINGS, INC. Summary Consolidated Income Statements (unaudited) $ in millions
	Three Months Ended June 30,						Six Months Ended June 30
Revenues:	2020			2019			2020			2019
Gross premiums written	$	140.2		$	176.6		$	324.9		$	386.6
Premiums ceded		(1.2	)		(1.4	)		(2.5	)		(2.7	)
Net premiums written		139.0			175.2			322.4			383.9
Net premiums earned	$	151.5		$	175.5		$	319.4		$	350.3
Net investment income		19.9			21.4			39.8			43.2
Net realized and unrealized gains (losses) on investments^(1)		39.7			7.4			(21.4	)		30.7
Other income		0.3			—			0.6			0.4
Total revenues		211.4			204.3			338.4			424.6
Expenses:
Losses and LAE incurred		(73.1	)		(86.8	)		(177.4	)		(175.3	)
Commission expense		(19.2	)		(23.8	)		(40.5	)		(45.8	)
Underwriting and general and administrative expenses		(44.8	)		(43.8	)		(91.5	)		(91.3	)
Interest and financing expenses		—			(0.2	)		—			(0.6	)
Total expenses		(137.1	)		(154.6	)		(309.4	)		(313.0	)
Net income before income taxes		74.3			49.7			29.0			111.6
Income tax expense		(14.7	)		(9.0	)		(4.3	)		(19.0	)
Net income		59.6			40.7			24.7			92.6
Unrealized AFS investment gains arising during the period, net of tax^(2)		69.3			29.9			40.2			67.7
Reclassification adjustment for realized AFS investment gains in net income, net of tax^(2)		(5.9	)		(0.2	)		(0.5	)		(0.7	)
Total comprehensive income	$	123.0		$	70.4		$	64.4		$	159.6
Net income	$	59.6		$	40.7		$	24.7		$	92.6
Amortization of the Deferred Gain - losses		(2.1	)		(3.2	)		(4.1	)		(5.2	)
Amortization of the Deferred Gain - contingent commission		(0.4	)		(0.5	)		(0.8	)		(1.0	)
LPT reserve adjustment		—			(1.8	)		—			(1.8	)
LPT contingent commission adjustments		—			(0.2	)		—			(0.2	)
Net income before impact of the LPT Agreement ^(3)		57.1			35.0			19.8			84.4
Net realized and unrealized (gains) losses on investments		(39.7	)		(7.4	)		21.4			(30.7	)
Income tax expense (benefit) related to items excluded from Net income		8.3			1.6			(4.5	)		6.4
Adjusted net income	$	25.7		$	29.2		$	36.7		$	60.1

(1)	Includes unrealized gains (losses) on equity securities of $42.3 million and $6.8 million for the three months ended June 30, 2020 and 2019, respectively, and $(26.9) million and $28.0 million for the six months ended June 30, 2020 and 2019, respectively.
(2)	AFS = Available for Sale securities.
(3)	See Page 13 regarding our use of Non-GAAP Financial Measures.

EMPLOYERS HOLDINGS, INC.
Net Income Before Income Taxes by Segment ^(1) (unaudited)
$ in millions
		Employers			Cerity			Corporate and Other			Consolidated
Three Months Ended June 30, 2020
Gross premiums written		$	140.2		$	—		$	—		$	140.2
Net premiums written			139.0			—			—			139.0
Net premiums earned	A		151.4			0.1			—			151.5
Net investment income			18.8			0.9			0.2			19.9
Net realized and unrealized gains on investments			38.2			1.3			0.2			39.7
Other income			0.3			—			—			0.3
Total revenues			208.7			2.3			0.4			211.4
Losses and LAE incurred	B		(75.6	)		—			2.5			(73.1	)
Commission expense	C		(19.2	)		—			—			(19.2	)
Underwriting and general and administrative expenses	D		(38.4	)		(4.3	)		(2.1	)		(44.8	)
Total expenses			(133.2	)		(4.3	)		0.4			(137.1	)
Net income (loss) before income taxes		$	75.5		$	(2.0	)	$	0.8		$	74.3
Underwriting income (loss)	A+B+C+D		18.2			(4.2	)
Loss and LAE expense ratio:
Current year			65.5	%		n/m
Prior years			(15.6	)		—
Loss and LAE ratio			49.9			n/m
Commission expense ratio			12.7			n/m
Underwriting expense ratio			25.4			n/m
Combined ratio			88.0	%		n/m

n/m - not meaningful

(1) See Page 14 for a description of our reportable segments

EMPLOYERS HOLDINGS, INC. Net Income Before Income Taxes by Segment ^(1) (unaudited)
$ in millions
		Employers			Cerity			Corporate and Other			Consolidated
Three Months Ended June 30, 2019
Gross premiums written		$	176.6		$	—		$	—		$	176.6
Net premiums written			175.2			—			—			175.2
Net premiums earned	A		175.5			—			—			175.5
Net investment income			20.3			—			1.1			21.4
Net realized and unrealized gains on investments			6.9			—			0.5			7.4
Total revenues			202.7			—			1.6			204.3
Losses and LAE incurred	B		(92.5	)		—			5.7			(86.8	)
Commission expense	C		(23.8	)		—			—			(23.8	)
Underwriting and general and administrative expenses	D		(35.9	)		(4.1	)		(3.8	)		(43.8	)
Interest and financing expenses			(0.2	)		—			—			(0.2	)
Total expenses			(152.4	)		(4.1	)		1.9			(154.6	)
Net income (loss) before income taxes		$	50.3		$	(4.1	)	$	3.5		$	49.7
Underwriting income (loss)	A+B+C+D	$	23.3		$	(4.1	)
Loss and LAE expense ratio:
Current year			66.2	%		n/m
Prior years			(13.5	)		—
Loss and LAE ratio			52.7			n/m
Commission expense ratio			13.6			n/m
Underwriting expense ratio			20.5			n/m
Combined ratio			86.8	%		n/m

n/m - not meaningful

(1) See Page 14 for a description of our reportable segments

EMPLOYERS HOLDINGS, INC. Net Income Before Income Taxes by Segment ^(1) (unaudited)
$ in millions
		Employers			Cerity			Corporate and Other			Consolidated
Six Months Ended June 30, 2020
Gross premiums written		$	324.9		$	—		$	—		$	324.9
Net premiums written			322.4			—			—			322.4
Net premiums earned	A		319.3			0.1			—			319.4
Net investment income			37.4			1.7			0.7			39.8
Net realized and unrealized losses on investments			(19.1	)		(0.4	)		(1.9	)		(21.4	)
Other income			0.6			—			—			0.6
Total revenues			338.2			1.4			(1.2	)		338.4
Losses and LAE incurred	B		(182.3	)		—			4.9			(177.4	)
Commission expense	C		(40.5	)		—			—			(40.5	)
Underwriting and general and administrative expenses	D		(77.6	)		(8.1	)		(5.8	)		(91.5	)
Total expenses			(300.4	)		(8.1	)		(0.9	)		(309.4	)
Net income (loss) before income taxes		$	37.8		$	(6.7	)	$	(2.1	)	$	29.0
Underwriting income (loss)	A+B+C+D		18.9			(8.0	)
Loss and LAE expense ratio:
Current year			65.6	%		n/m
Prior years			(8.5	)		—
Loss and LAE ratio			57.1			n/m
Commission expense ratio			12.7			n/m
Underwriting expense ratio			24.3			n/m
Combined ratio			94.1	%		n/m

n/m - not meaningful

(1) See Page 14 for a description of our reportable segments

EMPLOYERS HOLDINGS, INC.
Net Income Before Income Taxes by Segment ^(1) (unaudited)
$ in millions
		Employers			Cerity			Corporate and Other			Consolidated
Six Months Ended June 30, 2019
Gross premiums written		$	386.6		$	—		$	—		$	386.6
Net premiums written			383.9			—			—			383.9
Net premiums earned	A		350.3			—			—			350.3
Net investment income			40.9			—			2.3			43.2
Net realized and unrealized gains on investments			27.7			—			3.0			30.7
Other income			0.4			—			—			0.4
Total revenues			419.3			—			5.3			424.6
Losses and LAE incurred	B		(183.5	)		—			8.2			(175.3	)
Commission expense	C		(45.8	)		—			—			(45.8	)
Underwriting and general and administrative expenses	D		(75.2	)		(7.6	)		(8.5	)		(91.3	)
Interest and financing expenses			(0.6	)		—			—			(0.6	)
Total expenses			(305.1	)		(7.6	)		(0.3	)		(313.0	)
Net income (loss) before income taxes		$	114.2		$	(7.6	)	$	5.0		$	111.6
Underwriting income (loss)	A+B+C+D	$	45.8		$	(7.6	)
Loss and LAE expense ratio:
Current year			65.5	%		n/m
Prior years			(13.1	)		—
Loss and LAE ratio			52.4			n/m
Commission expense ratio			13.1			n/m
Underwriting expense ratio			21.5			n/m
Combined ratio			87.0	%		n/m

n/m - not meaningful

(1) See Page 14 for a description of our reportable segments

EMPLOYERS HOLDINGS, INC.
Return on Equity (unaudited)
$ in millions
		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2020			2019			2020			2019
Net income	A	$	59.6		$	40.7		$	24.7		$	92.6
Impact of the LPT Agreement			(2.5	)		(5.7	)		(4.9	)		(8.2	)
Net realized and unrealized (gains) losses on investments			(39.7	)		(7.4	)		21.4			(30.7	)
Income tax expense (benefit) related to items excluded from Net income			8.3			1.6			(4.5	)		6.4
Adjusted net income ^(1)	B		25.7			29.2			36.7			60.1
Stockholders' equity - end of period		$	1,144.0		$	1,121.5		$	1,144.0		$	1,121.5
Stockholders' equity - beginning of period			1,057.3			1,071.7			1,165.8			1,018.2
Average stockholders' equity	C		1,100.7			1,096.6			1,154.9			1,069.9
Stockholders' equity - end of period		$	1,144.0		$	1,121.5		$	1,144.0		$	1,121.5
Deferred Gain - end of period			132.2			141.7			132.2			141.7
Accumulated other comprehensive income - end of period			(132.9	)		(67.5	)		(132.9	)		(67.5	)
Income taxes related to accumulated other comprehensive income - end of period			27.9			14.2			27.9			14.2
Adjusted stockholders' equity - end of period			1,171.2			1,209.9			1,171.2			1,209.9
Adjusted stockholders' equity - beginning of period			1,150.4			1,195.2			1,237.6			1,181.5
Average adjusted stockholders' equity ^(1)	D		1,160.8			1,202.6			1,204.4			1,195.7
Return on stockholders' equity	A / C		5.4	%		3.7	%		2.1	%		8.7	%
Annualized return on stockholders' equity			21.7			14.8			4.3			17.3
Adjusted return on stockholders' equity ^(1)	B / D		2.2	%		2.4	%		3.0	%		5.0	%
Annualized adjusted return on stockholders' equity ^(1)			8.9			9.7			6.1			10.1

(1) See Page 13 for information regarding our use of Non-GAAP Financial Measures.

Roll-forward of Unpaid Losses and LAE (unaudited)
$ in millions
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Unpaid losses and LAE at beginning of period	$	2,191.7		$	2,189.3		$	2,192.8		$	2,207.9
Reinsurance recoverable on unpaid losses and LAE		527.0			498.7			532.5			504.4
Net unpaid losses and LAE at beginning of period		1,664.7			1,690.6			1,660.3			1,703.5
Losses and LAE incurred:
Current year losses		99.2			116.1			209.4			229.4
Prior year losses on voluntary business		(23.5	)		(24.0	)		(26.5	)		(46.0	)
Prior year losses on involuntary business		(0.1	)		0.3			(0.6	)		0.1
Total losses incurred		75.6			92.4			182.3			183.5
Losses and LAE paid:
Current year losses		17.1			23.2			24.0			30.6
Prior year losses		76.1			82.2			171.5			178.8
Total paid losses		93.2			105.4			195.5			209.4
Net unpaid losses and LAE at end of period		1,647.1			1,677.6			1,647.1			1,677.6
Reinsurance recoverable, excluding CECL allowance, on unpaid losses and LAE		523.6			484.2			523.6			484.2
Unpaid losses and LAE at end of period	$	2,170.7		$	2,161.8		$	2,170.7		$	2,161.8

Total losses and LAE shown in the above table exclude amortization of the Deferred Gain, LPT Reserve Adjustments, and LPT Contingent Commission Adjustments which totaled $2.5 million and $5.7 million for the three months ended June 30, 2020 and 2019, respectively and $4.9 million and $8.2 million for the six months ended June 30, 2020 and 2019, respectively.

	June 30, 2020									December 31, 2019
	Cost or
Investment Positions:	Amortized Cost		Net Unrealized Gain (Loss)			Fair Value		%		Fair Value		%
Fixed maturity securities	$	2,318.90	$	132.50		$	2,451.40	85	%	$	2,485.90	85	%
Equity securities		148.8		74.2			223	8			263.4	9
Short-term investments		42.7		0.4			43.1	1			—	—
Other invested assets		33.3		—			33.3	1			29.1	1
Cash and cash equivalents		131.8		—			131.8	5			154.9	5
Restricted cash and cash equivalents		0.3		—			0.3	—			0.3	—
Total investments and cash	$	2,675.8	$	207.1		$	2,882.9	100	%	$	2,933.6	100	%
Breakout of Fixed Maturity Securities:
U.S. Treasuries and agencies	$	89.70	$	5.40		$	95.10	4	%	$	88.50	4	%
States and municipalities		401.6		32.5			434.1	18			484.5	19
Corporate securities		952.4		76.1			1,028.50	42			1,079.00	43
Mortgage-backed securities		584.2		27			611.2	25			591	24
Asset-backed securities		42		(0.2	)		41.8	2			61.2	2
Collateralized loan obligations		84.4		(3.5	)		80.9	3			—	—
Bank loans		164.6		(4.8	)		159.8	7			181.7	7
Total fixed maturity securities	$	2,318.9	$	132.5		$	2,451.4	100	%	$	2,485.9	100	%
Weighted average book yield							3.20%			3.30%
Average credit quality (S&P)						A+				A+
Duration							2.7			3.3

EMPLOYERS HOLDINGS, INC.
Book Value Per Share (unaudited)
$ in millions, except per share amounts
		June 30, 2020			March 31, 2020			December 31, 2019			June 30, 2019
Numerators:
Stockholders' equity	A	$	1,144.0		$	1,057.3		$	1,165.8		$	1,121.5
Plus: Deferred Gain			132.2			134.7			137.1			141.7
Stockholders' equity including the Deferred Gain ^(1)	B		1,276.2			1,192.0			1,302.9			1,263.2
Accumulated other comprehensive (income) loss			(132.9	)		(52.7	)		(82.6	)		(67.5	)
Income taxes related to accumulated other comprehensive gains and losses			27.9			11.1			17.3			14.2
Adjusted stockholders' equity ^(1)	C	$	1,171.2		$	1,150.4		$	1,237.6		$	1,209.9
Denominator (shares outstanding)	D		29,382,894			30,403,012			31,355,378			31,904,916
Book value per share ^(1)	A / D	$	38.93		$	34.78		$	37.18		$	35.15
Book value per share including the Deferred Gain^(1)	B / D		43.43			39.21			41.55			39.59
Adjusted book value per share ^(1)	C / D		39.86			37.84			39.47			37.92
YTD Change in: ^(2)
Book value per share			6.1	%								14.5	%
Book value per share including the Deferred Gain			5.7									12.3
Adjusted book value per share			2.3									6.4

(1)	See Page 13 for information regarding our use of Non-GAAP Financial Measures.
(2)	Reflects the change in book value per share after taking into account dividends declared of $0.50 and $0.44 for the six months ended June 30, 2020 and 2019, respectively.

EMPLOYERS HOLDINGS, INC.
Earnings Per Share (unaudited)
$ in millions, except per share amounts
		Three Months Ended							Six Months Ended
		June 30,							June 30,
		2020			2019				2020			2019
Numerators:
Net income	A	$	59.6		$	40.7			$	24.7		$	92.6
Impact of the LPT Agreement			(2.5	)		(5.7	)			(4.9	)		(8.2	)
Net income before impact of the LPT ^(1)	B		57.1			35.0				19.8			84.4
Net realized and unrealized (gains) losses on investments			(39.7	)		(7.4	)			21.4			(30.7	)
Income tax expense related to items excluded from Net income			8.3			1.6				(4.5	)		6.4
Adjusted net income ^(1)	C	$	25.7		$	29.2			$	36.7		$	60.1
Denominators:
Average common shares outstanding (basic)	D		30,043,900			32,077,698				30,697,975			32,197,523
Average common shares outstanding (diluted)	E		30,229,553			32,450,628				31,020,128			32,639,885
Earnings per share:
Basic	A / D	$	1.98		$	1.27			$	0.80		$	2.88
Diluted	A / E		1.97			1.25				0.80			2.84
Earnings per share before impact of the LPT: ^(1)
Basic	B / D	$	1.90		$	1.09		$		0.64		$	2.62
Diluted	B / E		1.89			1.08				0.62			2.59
Adjusted earnings per share: ^(1)
Basic	C / D	$	0.86		$	0.91		$		1.20		$	1.87
Diluted	C / E		0.85			0.90				1.18			1.84

(1)	See Page 13 for information regarding our use of Non-GAAP Financial Measures.

Non-GAAP Financial Measures

Within this earnings release we present the following measures, each of which are "non-GAAP financial measures." A reconciliation of these measures to the Company's most directly comparable GAAP financial measures is included herein. Management believes that these non-GAAP measures are important to the Company's investors, analysts and other interested parties who benefit from having an objective and consistent basis for comparison with other companies within our industry. Management further believes that these measures are more relevant than comparable GAAP measures in evaluating our financial performance.

The LPT Agreement is a non-recurring transaction that does not result in ongoing cash benefits to the Company. Management believes that providing non-GAAP measures that exclude the effects of the LPT Agreement (amortization of deferred reinsurance gain, adjustments to LPT Agreement ceded reserves and adjustments to contingent commission receivable) is useful in providing investors, analysts and other interested parties a meaningful understanding of the Company's ongoing underwriting performance.

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

Adjusted net income (see Page 3 for calculations) is net income excluding the effects of the LPT Agreement, and net realized and unrealized gains and losses on investments (net of tax). Management believes that providing this non-GAAP measures is helpful to investors, analysts and other interested parties in identifying trends in the Company's operating performance because such items have limited significance to its ongoing operations or can be impacted by both discretionary and other economic factors and may not represent operating trends.

Stockholders' equity including the Deferred Gain (see Page 11 for calculations) is stockholders' equity including the Deferred Gain. Management believes that providing this non-GAAP measure is useful in providing investors, analysts and other interested parties a meaningful measure of the Company's total underwriting capital.

Adjusted stockholders' equity (see Page 11 for calculations) is stockholders' equity including the Deferred Gain, less accumulated other comprehensive income (net of tax). Management believes that providing this non-GAAP measure is useful to investors, analysts and other interested parties since it serves as the denominator to the Company's adjusted return on stockholders' equity metric.

Return on stockholders' equity and Adjusted return on stockholders' equity (see Page 8 for calculations). Management believes that these profitability measures are widely used by our investors, analysts and other interested parties.

Book value per share, Book value per share including the Deferred Gain, and Adjusted book value per share (see Page 11 for calculations). Management believes that these valuation measures are widely used by our investors, analysts and other interested parties.

Net income before impact of the LPT (see Page 3 for calculations). Management believes that these performance and underwriting measures are widely used by our investors, analysts and other interested parties.

Description of Reportable Segments

The Company has recently made changes to its corporate structure, mainly involving the launch and further development of a new digital insurance platform offered under the Cerity brand name (Cerity), resulting in changes to its reportable segments. The Company has determined that it has two reportable segments: Employers and Cerity. Each of these segments represents a separate and distinct underwriting platform through which the Company conducts insurance business.

The nature and composition of each reportable segment and its Corporate and Other activities are as follows:

• The Employers segment is defined as traditional business offered through the EMPLOYERS brand name (Employers) through its agents, including business originated from its strategic partnerships and alliances;
• The Cerity segment is defined as business offered under the Cerity brand name, which includes the Company's direct-to-customer business; and
• Corporate and Other activities consist of those holding company expenses that are not considered to be underwriting in nature, the financial impact of the LPT agreement and legacy (pre-acquisition) business assumed and ceded by Cerity Insurance Company. These expenses are not considered to be part of a reportable segment and are not otherwise allocated to a reportable segment.

Prior to December 31, 2019, the Company operated under a single reportable segment and presented its Combined Ratio on that basis. In light of its change in reporting segments, the Company now presents a separate Combined Ratio for each of its reporting segments.

All periods prior to December 31, 2019 presented herein have been conformed to the current presentation.