Employers Holdings, Inc. (“EHI” or the “Company”) (NYSE:EIG) today reported the following for the first quarter of 2018: (i) net income of $25.6 million ($0.77 per diluted share); (ii) net income before the impact of the LPT of $23.0 million ($0.69 per diluted share); and (iii) adjusted net income of $29.3 million ($0.88 per diluted share).

The Company's adjusted net income for the first quarter of 2018 increased $10.4 million year-over-year. This increase primarily reflects: (i) strong underwriting results highlighted by a 62.5% current accident year loss ratio before the impact of the LPT and $12.4 million of favorable prior year loss reserve development, and (ii) a reduction in our effective income tax rate from 21.4% to 12.9%, primarily reflecting the favorable impact of the December 2017 Tax Cuts and Job Act.

The Company's net income and net income before the impact of the LPT for the first quarter of 2018 increased by $2.4 million and $2.7 million, respectively, year-over-year. These first quarter 2018 net income measures were each adversely impacted by $10.2 million of after tax unrealized investment losses relating to the Company’s equity investments. Prior to January 1, 2018, the Company’s unrealized gains and losses on equity securities were not a component of net income or net income before the impact of the LPT.

The Company’s book value per share of $28.40 and book value per share including the Deferred Gain of $33.32 decreased by 1.6% and 1.7% during the first quarter of 2018, respectively, each computed after taking into account dividends declared. These first quarter 2018 book value measures were each adversely impacted by $35.8 million of after tax unrealized losses relating to the Company’s fixed maturity investments caused by an increase in market interest rates.

Chief Executive Officer Douglas Dirks commented on the results: “The first quarter marked a strong beginning to 2018 for EMPLOYERS. During the quarter we grew written premiums by 7% year-over-year, lowered our current accident year loss provision and recognized favorable development on our prior year loss reserves.

As a result of the addition of new writing states, an enhanced sales force and greater leveraging of our partnerships and alliances, we were able to increase our business writings. Loss costs and frequency trends continue to be favorable, despite highly competitive market conditions.

Our underwriting and other operating expense ratio increased by 1.8 percentage points in the quarter, in-line with our expectations as we develop and implement new digital capabilities.”

Summary of First Quarter 2018 Operating Results
(All comparisons vs. first quarter 2017, unless noted otherwise).

Gross premiums written were $211.6 million, an increase of 7% year-over-year. The increase was due primarily to new business writings, partially offset by declines in renewal business. Net earned premiums were $176.6 million, an increase of 1% year-over-year.

The loss and LAE ratio before the impact of the LPT of 55.5% decreased 8.3 percentage points year-over-year reflecting the continued impacts of key business initiatives including: an emphasis on settling open claims; diversifying our risk exposure across geographic markets; and leveraging data-driven strategies to target, underwrite and price profitable classes of business across all of our markets. Favorable prior year loss reserve development represented 7.0 percentage points of the decline.

The commission expense ratio of 13.4% increased 1.1 percentage points year-over-year due mainly to increases in agency incentives and in the amount of business produced by our partnerships and alliances.

The underwriting and other operating expense ratio of 22.2% increased 1.8 percentage points year-over-year due largely to expenses associated with the development and implementation of new technologies and capabilities.

Net investment income of $19.4 million, an increase of 3% year-over-year. The increase is due to a higher pre-tax book yield on invested assets.

Income tax expense was $3.8 million, a decrease of 40% year-over-year. The decrease is due to a reduction in the statutory Federal income tax rate from 35% to 21% as a result of the Tax Cuts and Job Act.

Stockholders’ Equity including the Deferred Gain, First Quarter 2018 Dividend Declaration

Stockholders’ equity including the Deferred Gain was $1,091.3 million, a decrease of 2% from December 31, 2017 as a result of unrealized losses relating to the Company's fixed maturity investments.

On April 25, 2018, the Board of Directors declared a second quarter 2018 dividend of $0.20 per share. The dividend is payable on May 23, 2018 to stockholders of record as of May 9, 2018.

Conference Call and Webcast, Reports Filed With The Securities and Exchange Commission (the "SEC") and Supplemental Materials

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.

Reconciliation of Non-GAAP Financial Measures to GAAP

Within this earnings release we present various financial measures, some of which are a "non-GAAP financial measure" 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 the Company's most directly comparable GAAP financial measures is included in the attached Financial Supplement. Management believes that these non-GAAP measures are meaningful 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. These non-GAAP measures are not a substitute for GAAP measures and investors should be careful when comparing the Company's non-GAAP financial measures to similarly titled measures used by other companies. Other companies may calculate these measures differently, and, therefore, these measures may not be comparable.

The Company will host a conference call on Thursday, April 26, 2018, at 8:30 a.m. Pacific Daylight Time. The conference call will be available via a live web cast on the Company's web site at www.employers.com. An archived version will be available several hours after the call. The conference call replay number is (404) 537-3406 or (855) 859-2056 with a pass code of 2449837.

The Company provides a list of portfolio securities in the Calendar of Events, “Investors” section of its website at www.employers.com. The Company also provides its filings with the Securities and Exchange Commission and its investor presentations on its website.

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. EHI and its management caution investors that such forward-looking statements are not guarantees of future performance. Risks and uncertainties are inherent in EHI's future performance. Factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements include, among other things, those discussed or identified from time to time in EHI's public filings with the SEC, including the risks detailed in the Company's Quarterly Reports on Form 10-Q and the Company's Annual Reports on Form 10-K. Except as required by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

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

Copyright © 2018 EMPLOYERS. All rights reserved. EMPLOYERS® and America's small business insurance specialist. ® are registered trademarks of Employers Insurance Company of Nevada. Employers Holdings, Inc. is a holding company with subsidiaries that are specialty providers of workers' compensation insurance and services focused on select, small businesses engaged in low to medium hazard industries. Insurance subsidiaries include Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Preferred Insurance Company, and Employers Assurance Company, all rated A- (Excellent) by A.M. Best Company.

Additional information can be found at: http://www.employers.com.

Employers Holdings, Inc.
First Quarter 2018
Financial Supplement

Total losses and LAE shown in the above table exclude amortization of the Deferred Gain, which totaled $2.6 million and $2.9 million for the three months ended March 31, 2018 and 2017, respectively.

Glossary of 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 4 for calculations) is net income excluding the effects of the LPT Agreement, net realized and unrealized gains (losses) on investments (net of tax), and amortization of intangible assets (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. The Company previously referred to Adjusted net income as Operating income.

Stockholders' equity including the Deferred Gain 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 8 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 operating return on equity metric.

Return on stockholders' equity and Adjusted return on stockholders' equity (see Page 4 for calculations). Management believes that these profitability measures are widely used by our investors, analysts and other interested parties. The Company previously referred to Adjusted return on stockholders' equity as Operating return on adjusted stockholders' equity.

Book value per share, Book value per share including the Deferred Gain, and Adjusted book value per share (see Page 8 for calculations). Management believes that these valuation measures are widely used by our investors, analysts and other interested parties. The Company previously referred to Book value per share as GAAP book value per share, and Book value per share including Deferred Gain as Book value per share.

Net income, Combined ratio, and Combined ratio before impact of the LPT (see Pages 3 and 5 for calculations). Management believes that these performance and underwriting measures are widely used by our investors, analysts and other interested parties.

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