Employers Holdings Inc
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 2, 2024
EIG$47.30+0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-26.
0001379041-24-000104
Item 2. Management’s Discussion and Analysis of Consolidated Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-02.
0001379041-24-000146
Item 2. Management’s Discussion and Analysis of Consolidated Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 128 previous paragraphs and 141 current paragraphs.
68 unchanged; 49 reworded; 23 added; 11 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
•Net premiums earned increased 6.0% and 6.5%;
Current report
•Losses and LAE increased 20.2% and 13.8%;
Current report
•Underwriting and general and administrative expenses decreased 10.0% and 3.4%;
Current report
•Underwriting income of $10.8 million and $7.8 million, compared to $17.0 million and $14.5 million;
Current report
•Net investment income of $26.9 million and $53.8 million, compared to $26.8 million and $54.4 million; and
Current report
Three and Six Months Ended June 30, 2024
Current report
Three and Six Months Ended June 30, 2023
Current report
Net premiums earned were $187.8 million and $372.6 million for the three and six months ended June 30, 2024, compared to $177.1 million and $349.8 million for the corresponding periods of 2023.
Current report
The increase in our calendar year losses and LAE during the three months ended June 30, 2024, as compared to the same period of 2023, was primarily due to higher earned premium, a higher current accident year loss and LAE estimate, and lower net favorable prior year loss reserve development. Favorable prior year loss reserve development totaled $9.1 million and $19.7 million during the three months ended June 30, 2024 and 2023, respectively, which included $9.3 million and $20.0 million net favorable loss reserve development on our voluntary risk business, partially offset by $0.2 million and $0.3 million of net unfavorable loss reserve development on our assigned risk business.
Current report
The increase in our calendar year losses and LAE during the six months ended June 30, 2024, as compared to the same period of 2023, was primarily due to higher earned premium, a higher current accident year loss and LAE estimate, and lower net favorable prior year loss reserve development. Favorable prior year loss reserve development totaled $9.2 million and $19.9 million during the six months ended June 30, 2024 and 2023, respectively, which included $9.3 million and $20.0 million net favorable loss reserve development on our voluntary risk business, each partially offset by $0.1 million of net unfavorable loss reserve development on our assigned risk business.
Current report
The favorable prior year loss development on our voluntary business during the three and six months ended June 30, 2024 resulted from continued overall favorable loss experience, which related primarily to accident years 2022 and prior, partially offset by unfavorable prior year loss experience in accident year 2023 associated with certain large claims.
Current report
The favorable prior year loss development on our voluntary business during the three and six months ended June 30, 2023 resulted from continued overall favorable loss experience, which related primarily to accident years 2020 and prior.
Current report
Our underwriting and general and administrative expense ratio was 22.0% and 23.4% for the three and six months ended June 30, 2024, respectively, compared to 26.0% and 25.8% for the corresponding periods of 2023, and our underwriting expenses were $41.4 million and $87.2 million for the three and six months ended June 30, 2024, respectively, compared to $46.0 million and $90.3 million for the corresponding periods of 2023.
Current report
The decrease in underwriting expenses for the three and six months ended June 30, 2024, were primarily the result of decreases in: (i) professional fees of $1.8 million and $3.2 million; (ii) marketing and advertising expenses of $0.8 million and $1.8 million; (iii) facilities expenses of $0.4 million and $0.9 million; and (iv) information technology expenses of $0.3 million and $1.9 million, each as compared to the corresponding periods of 2023. The integration plan we executed in the fourth quarter of 2023, which consolidated our previously segregated direct-to-consumer operations (Cerity) into our mainstream operations, was a significant contributor to the expense reductions for the three and six months ended June 30, 2024.
Current report
Other Expenses
Current report
During the three months ended June 30, 2023, we recorded a non-recurring charge in connection with the early termination of the lease associated with our former corporate headquarters in Reno, Nevada. This charge included a one-time lease termination payment of $7.6 million, a write-off related to remaining leasehold improvements and furniture and equipment of $2.6 million, and estimated miscellaneous expenses associated with exiting the property of $0.2 million. We also recognized a lease termination gain pertaining to the elimination of the lease liability, net of an associated ROU asset of $1.0 million, which was included in Other expenses on our Consolidated Statements of Comprehensive Income (Loss). The decision to terminate this operating lease was undertaken as part of an ongoing review of our facility needs.
Current report
During the second quarter of 2024, EPIC declared a $23.2 million dividend payment to EGI, which was paid in July 2024 and subsequently distributed to EHI. As a result of that dividend payment, EPIC cannot pay dividends for the remainder of 2024 without prior regulatory approval.
Current report
During the second quarter of 2024, EAC declared a $22.4 million dividend payment to EGI, which was paid in July 2024 and subsequently distributed to EHI. As a result of that dividend payment, EAC cannot pay dividends for the remainder of 2024 without prior regulatory approval.
Current report
On May 28, 2024, EHI entered into the Credit Agreement which provides for a $25.0 million, unsecured, three-year revolving credit facility and is guaranteed by EGI and CGI. Borrowings under the Credit Agreement may be used for working capital and general corporate purposes of EHI and its subsidiaries. Pursuant to the terms of the Credit Agreement, EHI has an option to request an increase of the credit available under the facility up to a maximum facility amount of $35.0 million, subject to the consent of the lender(s) and the satisfaction of certain conditions.
Current report
The interest rates applicable to loans under the Credit Agreement are generally based on, at EHI's option: (i) a base rate, defined as the higher of the Prime Rate, the Federal Funds Rate plus 1.25% and the Adjusted Term SOFR Rate for a one-month tenor plus 1.75%, or (ii) an Adjusted Term SOFR Rate, defined as the applicable Adjusted Term SOFR Rate plus 1.75%. Borrowings under the Credit Agreement may be used for working capital and general corporate purposes of EHI and its subsidiaries. Total interest paid and/or fees incurred pursuant to the Credit Agreement wasless than $0.1 million during the three months ended June 30, 2024.
Current report
The Credit Agreement contains covenants that require EHI and its consolidated subsidiaries to maintain: (i) a minimum consolidated net worth, defined as EHI’s total stockholders’ equity excluding any accumulated other comprehensive income or loss, of no less than $800.0 million; and (ii) a debt to total capitalization ratio of no more than 35%, in each case as determined in accordance with the Credit Agreement. As of June 30, 2024, EHI has remained in compliance with all of the covenants associated with the Credit Agreement since its inception.
Current report
EHI had no borrowings under the Credit Agreement during the three months ended June 30, 2024.
Current report
Net cash used in financing activities for the six months ended June 30, 2023, related primarily to common stock repurchases, repayments of FHLB advances, and stockholder dividend payments.
Removed paragraphs (11)
Previous report
•Net premiums earned increased 7.1%;
Previous report
•Losses and LAE increased 8.5%;
Previous report
•Underwriting and general and administrative expenses increased 3.2%;
Previous report
•Underwriting loss of $2.9 million, compared to $2.5 million;
Previous report
•Net investment income of $26.8 million, compared to $27.6 million; and
Previous report
Three Months Ended March 31, 2024
Previous report
Three Months Ended March 31, 2023
Previous report
Net premiums earned were $184.9 million for the three months ended March 31, 2024, compared to $172.7 million for the corresponding period of 2023.
Previous report
The increase in our calendar year losses and LAE during the three months ended March 31, 2024, as compared to the same period of 2023, was primarily due to higher earned premium and a higher accident year loss and LAE estimate. All of the favorable development that we recognized during these periods related to our assigned risk business.
Previous report
(1)LPT Contingent Commission Adjustments result in an adjustment to the Contingent commission receivable - LPT Agreement, which is recognized in losses and LAE incurred on our Consolidated Statements of Comprehensive Income (Loss). (See Note 9 in the Notes to our Consolidated Financial Statements.)
Previous report
Our underwriting and general and administrative expense ratio was 24.8% and 25.7%, and our underwriting expenses were $45.8 million and $44.4 million for the three months ended March 31, 2024 and 2023, respectively. The increase in underwriting expenses for the three months ended March 31, 2024 was primarily the result of increases in compensation-related expenses of $2.8 million and bad debt expense of $2.3 million, partially offset by decreases in depreciation and amortization of $1.6 million, marketing and advertising expenses of $1.0 million, and professional fees of $0.9 million, each compared to the same period of 2023.
Reworded paragraphs (49)
Previous wording
You should read the following discussion and analysis in conjunction with our consolidated financial statements and the related notes thereto included in Item 1 of Part I. Unless otherwise indicated, all references to "we," "us," "our," "the Company," or similar terms refer to EHI, together with its subsidiaries. In this Quarterly Report on Form 10-Q, 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, economic or market conditions, including current levels of inflation, changes in interest rates, labor market expectations, catastrophic events or geo-political conditions, legislative or regulatory actions or court decisions, 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 SEC, including the risks detailed in the Company's Annual Reports on Form 10-K and in Part II, Item 1A of this report. 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.
Current wording
You should read the following discussion and analysis in conjunction with our consolidated financial statements and the related notes thereto included in Item 1 of Part I. Unless otherwise indicated, all references to "we," "us," "our," "the Company," or similar terms refer to EHI, together with its subsidiaries. In this Quarterly Report on Form 10-Q, 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, economic or market conditions, including current levels of inflation, changes in interest rates, labor market expectations, catastrophic events or geo-political conditions, legislative or regulatory actions or court decisions, 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 SEC, including the risks detailed in the Company's Annual Reports on Form 10-K and in the Company's Quarterly Reports on Form 10-Q. 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.
Previous wording
Our net income was $28.3 million for the three months ended March 31, 2024 compared to $23.6 million for the corresponding period of 2023. The key factors that affected our financial performance during the three months ended March 31, 2024, compared to the same period of 2023, included:
Current wording
Our net income was $31.7 million and $60.0 million for the three and six months ended June 30, 2024, respectively, compared to $34.9 million and $58.5 million for the corresponding periods of 2023. The key factors that affected our financial performance during the three and six months ended June 30, 2024, compared to the same periods of 2023, included:
Previous wording
•Net realized and unrealized gains on investments of $11.4 million, compared to $6.4 million.
Current wording
•Net realized and unrealized gains on investments of $2.2 million and $13.6 million, compared to $11.3 million and $17.7 million.
Previous wording
Our underwriting results reflect a 7% increase in net premiums earned, compared to the first quarter of 2023, due to higher new and renewal business premiums. Our investment results benefited from strong and steady net investment income and moderate net realized and unrealized gains.
Current wording
Our 2024 underwriting results reflect moderate increases in net premiums earned, compared to the same periods of 2023, due to higher new and renewal business premiums, as well as continued favorable prior year loss reserve development and underwriting and general and administrative expense savings. Our investment results benefited from strong and steady net investment income and moderate net realized and unrealized gains.
Previous wording
Our underwriting results reflect a 15% increase in net premiums earned, compared to the first quarter of 2022, due to higher new and renewal business premiums and strong final audit premiums. Our investment results benefited from strong and steady net investment income and moderate net realized and unrealized gains.
Current wording
Our 2023 underwriting results reflect moderate increases in net premiums earned, compared to the same periods of 2022, due to higher new and renewal business premiums and strong final audit premiums, as well as continued favorable prior year loss reserve development. Our investment results benefited from strong net investment income and favorable net realized and unrealized gains.
Previous wording
Our consolidated financial results of operations for the three months ended March 31, 2024 and 2023 are as follows:
Current wording
Our consolidated financial results of operations for the three and six months ended June 30, 2024 and 2023 are as follows:
Previous wording
Underwriting income or loss is determined by deducting losses and LAE, commission expenses, and underwriting and general and administrative expenses from net premiums earned. Our underwriting results for the three months ended March 31, 2024 and 2023 are as follows:
Current wording
Underwriting income or loss is determined by deducting losses and LAE, commission expenses, and underwriting and general and administrative expenses from net premiums earned. Our underwriting results for the three and six months ended June 30, 2024 and 2023 are as follows:
Previous wording
(1) The LPT Agreement is a non-recurring (loss portfolio transfer) transaction that does not result in any significant ongoing benefits to the Company. We provide our underwriting income and combined ratios excluding the effects of the LPT because we believe that these measures are useful in providing investors, analysts and other interested parties a meaningful understanding of our ongoing underwriting performance and provides them with a consistent basis for comparison with other companies in our industry. In addition, we believe that these non-GAAP measures, as presented, are helpful to our management in identifying trends in our performance because the LPT has limited significance to our current and ongoing operations.
Current wording
(1) The LPT Agreement is a non-recurring transaction that does not provide us with any significant ongoing cash benefits. We provide our underwriting income and combined ratios excluding the effects of the LPT because we believe that these measures are useful in providing investors, analysts and other interested parties a meaningful understanding of our ongoing underwriting performance and provides them with a consistent basis for comparison with other companies in our industry. In addition, we believe that these non-GAAP measures, as presented, are helpful to our management in identifying trends in our performance because the LPT has limited significance to our current and ongoing operations.
Previous wording
Gross premiums written were $210.9 million for the three months ended March 31, 2024 compared to $194.9 million for the corresponding period of 2023. The growth in new business premiums we experienced is the result of an increase in new submissions, quotes and binds in the majority of the states in which we operate, which is being largely driven by the expansion in the classes of business that we offer. As a result of these continued initiatives, we closed another quarter with a record number of policies in-force. In addition, our renewal premiums benefited from continued strong retention rates during the three months ended March 31, 2024.
Current wording
Gross premiums written were $207.9 million and $418.7 million for the three and six months ended June 30, 2024, compared to $198.4 million and $393.3 million for the corresponding periods of 2023. The growth in new business premiums we experienced is the result of an increase in new submissions, quotes and binds in the majority of the states in which we operate, which is being largely driven by the expansion in the classes of business that we offer, with these increases being partially offset by lower final audit premiums. As a result of these continued initiatives, we closed another quarter with a record number of policies in-force. In addition, our renewal premiums benefited from continued strong retention rates experienced throughout the first half of 2024.
Previous wording
Net premiums written are gross premiums written less reinsurance premiums ceded. For each of the periods presented, the reinsurance premiums ceded related to our July 1 - June 30 annual reinsurance programs as further described herein.
Current wording
Net premiums written are gross premiums written less reinsurance premiums ceded. For each of the periods presented, the reinsurance premiums ceded related to our annual reinsurance program as further described herein.
Previous wording
Net premiums written were $209.1 million for the three months ended March 31, 2024, compared to $193.1 million for the corresponding period of 2023. Reinsurance premiums ceded were $1.8 million for each of the three months ended March 31, 2024 and March 31, 2023.
Current wording
Net premiums written were $206.1 million and $415.2 million for the three and six months ended June 30, 2024, compared to $196.6 million and $389.7 million for the corresponding periods of 2023. Reinsurance premiums ceded were $1.8 million and $3.5 million for the three and six months ended June 30, 2024, compared to $1.8 million and $3.6 million for the corresponding periods of 2023.
Previous wording
Our current accident year loss and LAE ratio was 64.1% (64.0% excluding involuntary business) for the three months ended March 31, 2024, compared to 63.5% (63.3% excluding involuntary business) for the corresponding period of 2023. Our current accident year loss and LAE ratios continue to reflect the impact of key business initiatives: an emphasis on accelerated settlements of open claims; further diversifying its risk exposure across geographic markets, when appropriate; and leveraging data-driven strategies to target, underwrite, and price profitable classes of business across all of our markets.
Current wording
Our current accident year loss and LAE ratio was 63.9% and 64.1% (64.0% excluding our assigned risk business) for the three and six months ended June 30, 2024, compared to 63.4% (63.3% excluding our assigned risk business) for each of the corresponding periods of 2023. Our current accident year loss and LAE ratios continue to reflect the impact of key business initiatives: an emphasis on accelerated settlements of open claims; further diversifying its risk exposure across geographic markets, when appropriate; and leveraging data-driven strategies to target, underwrite, and price profitable classes of business across all of our markets.
Previous wording
Excluding the impact from the LPT Agreement, losses and LAE would have been $118.4 million and $109.4 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Excluding the impact from the LPT Agreement, losses and LAE would have been $110.9 million and $229.5 million for the three and six months ended June 30, 2024, compared to $92.5 million and $201.9 million for the corresponding periods of 2023.
Previous wording
Our commission expense ratio was 13.8% and 13.5%, and our commission expenses were $25.5 million and $23.4 million for the three months ended March 31, 2024 and 2023, respectively. The increase for the three months ended March 31, 2024 was primarily related to an increase in new business writings, which are typically subject to higher initial commission rates, and an increase in anticipated 2024 agency incentives.
Current wording
Our commission expense ratio was 14.3% and 14.0% for the three and six months ended June 30, 2024, respectively, compared to 13.3% and 13.5% for the corresponding periods of 2023, and our commission expenses were $26.8 million and $52.3 million for the three and six months ended June 30, 2024, respectively, compared to $23.6 million and $47.1 million for the corresponding periods of 2023. The increase in our commission expense ratios were primarily related to: (i) an increase in new business writings, which are typically subject to a higher initial commission rate; and (ii) a reduction in commission expense for uncollected premium recorded in the second quarter of 2023.
Previous wording
Net investment income decreased 2.9% for the three months ended March 31, 2024, compared to the same period of 2023. The decrease was due to a lower invested balance of fixed maturity securities and short-term investments, as measured by amortized cost, resulting primarily from the unwinding of our former FHLB leveraged investment strategy, which was in effect from the first quarter of 2022 to the fourth quarter of 2023.
Current wording
Net investment income increased 0.4% and decreased 1.1% for the three and six months ended June 30, 2024, compared to the same periods of 2023. The decrease for the six months ended June 30, 2024 was due to a lower invested balance of fixed maturity securities and short-term investments, as measured by amortized cost, resulting primarily from the unwinding of our former FHLB leveraged investment strategy, which was in effect from the first quarter of 2022 to the fourth quarter of 2023. Pursuant to that strategy, certain of our insurance subsidiaries had received aggregate advances under the FHLB Standard Credit Program, the proceeds from which were used to purchase an equivalent amount of high-quality collateralized loan obligation securities.
Previous wording
Realized and unrealized gains and losses on our investments are reported separately from our net investment income. Realized gains and losses on investments include the gain or loss on a security at the time of sale compared to its original or adjusted cost (equity securities) or amortized cost (fixed maturity securities). Realized losses are also recognized for changes in our CECL allowance or when securities are written down because of an other-than-temporary impairment. Changes in the fair value of equity securities and other invested assets are also included in Net realized and unrealized gains (losses) on investments on our Consolidated Statements of Comprehensive Income (Loss).
Current wording
Realized and unrealized gains and losses on our investments are reported separately from our net investment income. Realized gains and losses on investments include the gain or loss on a security at the time of sale compared to its original or adjusted cost (equity securities) or amortized cost (fixed maturity securities). Realized losses are also recognized for adverse changes in our CECL allowance or when securities are written down because of an other-than-temporary impairment. Changes in the fair value of equity securities and other invested assets are also included in Net realized and unrealized gains (losses) on investments on our Consolidated Statements of Comprehensive Income (Loss).
Previous wording
Net realized and unrealized gains on investments were $11.4 million for the three months ended March 31, 2024, compared to $6.4 million for the corresponding period of 2023. The net realized and unrealized gains on investments for the three months ended March 31, 2024 and 2023 included $12.3 million and $8.0 million of net realized and unrealized gains on equity securities and other investments, respectively, and $0.9 million and $1.6 million of net realized losses on fixed maturity securities, respectively.
Current wording
Net realized and unrealized gains on investments were $2.2 million and $13.6 million for the three and six months ended June 30, 2024, compared to $11.3 million and $17.7 million for the corresponding periods of 2023. The net realized and unrealized gains on investments for the three months ended June 30, 2024 and 2023 included $5.7 million and $11.4 million of net realized and unrealized gains on equity securities and other investments, respectively, and $3.5 million and $0.1 million of net realized losses on fixed maturity securities, respectively. The net realized and unrealized gains on investments for the six months ended June 30, 2024 and 2023 included $18.0 million and $19.4 million of net realized and unrealized gains on equity securities and other investments, respectively, and $4.4 million and $1.7 million of net realized losses on fixed maturity securities, respectively.
Previous wording
The net investment gains and losses on our equity securities during the three months ended March 31, 2024 were largely consistent with the performance of U.S. equity markets. The net realized investment losses on our fixed maturity securities during the three months ended March 31, 2024 were primarily the result of a $0.5 million increase in our allowance for CECL.
Current wording
The net investment gains and losses on our equity securities during the three and six months ended June 30, 2024 were the result of price appreciation for our investments holdings. The net realized investment losses on our fixed maturity securities during the three and six months ended June 30, 2024 were primarily the result of sales associated with the rebalancing of our fixed maturity investment portfolio partially offset by a $1.3 million and $0.8 million decrease in our allowance for CECL, respectively.
Previous wording
The net investment gains on our equity securities during the three months ended March 31, 2023 were largely consistent with the performance of U.S. equity markets. The net realized investment losses on our fixed maturity securities during the three months ended March 31, 2023 were primarily the result of a $1.4 million increase in our allowance for CECL, which resulted primarily from volatility and credit concerns in certain financial and banking markets.
Current wording
The net investment gains on our equity securities during the three and six months ended June 30, 2023 were the result of price appreciation for our investment holdings. The net realized investment losses on our fixed maturity securities during the three and six months ended June 30, 2023 were largely concentrated in certain holdings in the financial and banking sectors, partially offset by a $1.6 million and $0.2 million decrease in our allowance for CECL, respectively.
Previous wording
Interest and financing expenses include fees and interest associated with our $75.0 million three-year revolving credit facility, fees and interest associated with our various credit arrangements with the FHLB, finance lease interest, and other financing fees.
Current wording
Interest and financing expenses include fees and interest associated with our credit facilities, fees and interest associated with our various credit arrangements with the FHLB, finance lease interest, and other financing fees.
Previous wording
Interest and financing expenses were less than $0.1 million for the three months ended March 31, 2024, compared to $2.3 million for the corresponding period of 2023. The decrease resulted primarily from the unwinding of our former FHLB leveraged investment strategy, which was in effect from the first quarter of 2022 to the fourth quarter of 2023.
Current wording
Interest and financing expenses were less than $0.1 million for each of the three and six months ended June 30, 2024, compared to $1.9 million and $4.2 million for the corresponding periods of 2023. The decreases resulted primarily from the unwinding of our former FHLB leveraged investment strategy, which was in effect from the first quarter of 2022 to the fourth quarter of 2023.
Previous wording
Income tax expense was $7.0 million for the three months ended March 31, 2024, compared to $5.4 million for the corresponding period of 2023. The effective tax rates were 19.8% for the three months ended March 31, 2024, compared to 18.6% for the corresponding period of 2023. The effective rates during each of the periods presented included income tax benefits and exclusions associated with tax-advantaged investment income, LPT adjustments, and deferred gain amortization.
Current wording
Income tax expense was $8.3 million and $15.3 million for the three and six months ended June 30, 2024, respectively, compared to $8.9 million and $14.3 million for the corresponding periods of 2023. The effective tax rates were 20.8% and 20.3% for the three and six months ended June 30, 2024, respectively, compared to 20.3% and 19.6% for the corresponding periods of 2023. The effective rates during each of the periods presented included income tax benefits and exclusions associated with tax-advantaged investment income, LPT adjustments, and deferred gain amortization.
Previous wording
We believe that our total capital position remains strong and that the liquidity available to EHI and its subsidiaries remains adequate and will be sufficient for our financing needs in the next 12 months and in the longer term period thereafter. As a result, we do not currently foresee a need to: (i) suspend dividends at either EHI or its insurance subsidiaries; (ii) forego repurchases of EHI's common stock; (iii) seek additional capital; or (iii) seek any material non-investment asset sales.
Current wording
We believe that our total capital position remains strong and that the liquidity available to EHI and its subsidiaries remains adequate and will be sufficient for our financing needs in the next 12 months and in the longer term period thereafter. As a result, we do not currently foresee a need to: (i) suspend dividends at either EHI or its insurance subsidiaries; (ii) forego repurchases of EHI's common stock; (iii) seek additional capital; or (iii) seek any material non-investment asset sales, though we may decide to pursue those or other options if our financial circumstances change or it we deem it strategically advantageous to do so.
Previous wording
During the first quarter of 2024, ECIC made a $23.3 million dividend payment to its parent company, which in turn distributed that amount to EHI. As a result of that dividend payment, ECIC cannot pay dividends for the remainder of 2024 without prior regulatory approval.
Current wording
During the first quarter of 2024, ECIC made a $23.3 million dividend payment to EGI, which in turn distributed that amount to EHI. As a result of that dividend payment, ECIC cannot pay dividends for the remainder of 2024 without prior regulatory approval.
Previous wording
During the first quarter of 2024, EICN made a $13.7 million dividend payment to its parent company, which in turn distributed that amount to EHI. As a result of that dividend payment, EICN cannot pay any dividends for the remainder of 2024 without prior regulatory approval.
Current wording
During the first quarter of 2024, EICN made a $13.7 million dividend payment to EGI, which in turn distributed that amount to EHI. As a result of that dividend payment, EICN cannot pay any dividends for the remainder of 2024 without prior regulatory approval.
Previous wording
Total cash and investments at EHI were $66.6 million at March 31, 2024, consisting of $40.8 million of cash and cash equivalents, $1.3 million of fixed maturity securities, and $24.5 million of equity securities.
Current wording
Total cash and investments at EHI were $38.7 million at June 30, 2024, consisting of $4.0 million of cash and cash equivalents, $10.4 million of fixed maturity securities, and $24.3 million of equity securities.
Previous wording
Total cash and investments held by our operating subsidiaries was $2,427.7 million at March 31, 2024, consisting of $73.6 million of cash and cash equivalents, and restricted cash, $38.2 million of short-term investments, $2,012.5 million of fixed maturity securities, $205.8 million of equity securities, and $97.6 million of other invested assets. Sources of immediate and unencumbered liquidity at our operating subsidiaries as of March 31, 2024 consisted of $73.4 million of cash and cash equivalents, $199.7 million of publicly traded equity securities whose proceeds are available within three business days, $668.5 million of highly liquid fixed maturity securities whose proceeds are available within three business days and $17.7 million of short-term investments whose proceeds are available within three business days. We believe that our subsidiaries’ liquidity needs over the next 12 months and for the longer term period thereafter will be met with cash from operations, investment income, and maturing investments.
Current wording
Total cash and investments held by our operating subsidiaries was $2,433.1 million at June 30, 2024, consisting of $91.7 million of cash and cash equivalents, and restricted cash, $30.9 million of short-term investments, $1,999.0 million of fixed maturity securities, $214.0 million of equity securities, and $97.5 million of other invested assets. Sources of immediate and unencumbered liquidity at our operating subsidiaries as of June 30, 2024 consisted of $91.5 million of cash and cash equivalents, $208.3 million of publicly traded equity securities whose proceeds are available within two business days, $665.3 million of highly liquid fixed maturity securities whose proceeds are available within two business days and $17.9 million of short-term investments whose proceeds are available within two business days. We believe that our subsidiaries’ liquidity needs over the next 12 months and for the longer term period thereafter will be met with cash from operations, investment income, and maturing investments.
Previous wording
FHLB membership also allows our insurance subsidiaries access to standby Letter of Credit Agreements. Letter of Credit Agreements we currently have in effect will expire March 31, 2025 and may only be used to satisfy, in whole or in part, insurance deposit requirements with the State of California and are fully secured with eligible collateral at all times (See Note 10).
Current wording
FHLB membership also allows our insurance subsidiaries access to standby Letter of Credit Agreements. Letter of Credit Agreements we currently have in effect will expire March 31, 2025 and must be fully secured with eligible collateral at all times (See Note 10).
Previous wording
Various state laws and regulations require us to hold investment securities or letters of credit on deposit with certain states in which we do business. Securities having a fair value of $760.6 million and $748.1 million were on deposit at March 31, 2024 and December 31, 2023, respectively. These laws and regulations govern both the amount and types of investment securities that are eligible for deposit. Additionally, standby letters of credit from the FHLB have been issued in lieu of $70.0 million securities on deposit at both March 31, 2024 and December 31, 2023.
Current wording
Various state laws and regulations require us to hold investment securities or letters of credit on deposit with certain states in which we do business. Securities having a fair value of $758.6 million and $748.1 million were on deposit at June 30, 2024 and December 31, 2023, respectively. These laws and regulations govern both the amount and types of investment securities that are eligible for deposit. Additionally, standby letters of credit from the FHLB have been issued in lieu of $70.0 million of securities on deposit at both June 30, 2024 and December 31, 2023.
Previous wording
We purchase reinsurance to protect us against the costs of severe claims and catastrophic events, including pandemics. On July 1, 2023, we entered into a new reinsurance program, which is largely unchanged from our expiring reinsurance program, which is effective through June 30, 2024. The reinsurance program consists of one treaty covering excess of loss and catastrophic loss events in four layers of coverage. Our reinsurance coverage is $190.0 million in excess of our $10.0 million retention on a per occurrence basis, subject to certain exclusions. We believe that our reinsurance program meets our needs and that we are sufficiently capitalized.
Current wording
We purchase reinsurance annually to protect us against the costs of severe claims and certain catastrophic events. On July 1, 2024, we entered into a new reinsurance program that is effective through June 30, 2025. The reinsurance program consists of one treaty covering excess of loss and catastrophic loss events in four layers of coverage. Our reinsurance coverage is $190.0 million in excess of our $10.0 million retention on a per occurrence basis, subject to certain exclusions. We believe that our reinsurance program meets our needs and that we are sufficiently capitalized.
Previous wording
The table below shows our net cash flows for the three months ended:
Current wording
The table below shows our net cash flows for the six months ended:
Previous wording
Net cash provided by operating activities for the three months ended March 31, 2024, included net premiums received of $185.1 million and investment income received of $26.2 million. The cash provided by these operating activities were largely offset by net claims payments of $124.6 million, underwriting and general and administrative expenses paid of $57.3 million, and commissions paid of $28.8 million.
Current wording
Net cash provided by operating activities for the six months ended June 30, 2024, included net premiums received of $372.5 million and investment income received of $52.7 million. The cash provided by these operating activities were largely offset by net claims payments of $252.9 million, underwriting and general and administrative expenses paid of $94.4 million, commissions paid of $51.1 million, and federal income taxes paid of $14.5 million.
Previous wording
Net cash provided by operating activities for the three months ended March 31, 2023, included net premiums received of $171.7 million and investment income received of $26.8 million. These operating cash inflows were partially offset by net claims payments of $111.5 million, underwriting and general and administrative expenses paid of $53.9 million, commissions paid of $26.5 million, and interest paid of $2.3 million.
Current wording
Net cash used in operating activities for the six months ended June 30, 2023, included net premiums received of $340.1 million and investment income received of $56.6 million. These operating cash inflows were more than offset by net claims payments of $226.1 million, underwriting and general and administrative expenses paid of $93.9 million, commissions paid of $46.7 million, interest paid of $4.2 million, lease termination and related disposal payments of $7.8 million, and federal income taxes paid of $21.5 million.
Previous wording
Net cash used in investing activities for the three months ended March 31, 2024, related primarily to investment of premiums received and the reinvestment of funds from invest sales, maturities, redemptions, and interest income. The cash used in these investment activities was partially offset by investment sales, maturities, and redemptions whose proceeds were used to fund claims payments, underwriting and general and administrative expenses, stockholder dividend payments, and common stock repurchases.
Current wording
Net cash used in investing activities for the six months ended June 30, 2024, related primarily to investment of premiums received and the reinvestment of funds from invest sales, maturities, redemptions, and interest income. The cash used in these investment activities was partially offset by investment sales, maturities, and redemptions whose proceeds were used to fund claims payments, underwriting and general and administrative expenses, stockholder dividend payments, and common stock repurchases.
Previous wording
Net cash provided by investing activities for the three months ended March 31, 2023, related primarily to investment sales, maturities, and redemptions whose proceeds were used to fund claims payments, underwriting and general and administrative expenses, stockholder dividend payments, and common stock repurchases. These investing cash inflows were partially offset by the investment of premiums received and reinvestment of funds from investment sales, maturities, redemptions, and interest income.
Current wording
Net cash provided by investing activities for the six months ended June 30, 2023, was primarily related to investment sales, maturities, and redemptions whose proceeds were used to fund claims payments, underwriting and general and administrative expenses, stockholder dividend payments, and common stock repurchases. These investing cash inflows were partially offset by the investment of premiums received and reinvestment of funds from investment sales, maturities, redemptions, and interest income.
Previous wording
Net cash used in financing activities for the three months ended March 31, 2024 and 2023, related primarily to stockholder dividend payments and common stock repurchases.
Current wording
Net cash used in financing activities for the six months ended June 30, 2024, related primarily to stockholder dividend payments and common stock repurchases.
Previous wording
We paid $7.8 million and $7.6 million in dividends to our stockholders and eligible plan award holders for the three months ended March 31, 2024 and 2023, respectively. The declaration and payment of future dividends to common stockholders, including any special dividends that may be declared in the future, will be at the discretion of our Board of Directors (Board) and will depend upon many factors including our financial position, capital requirements of our operating subsidiaries, legal and regulatory requirements, and any other factors that our Board deems relevant. On April 24, 2024, the Board declared a quarterly dividend per share of $0.30, which is payable May 22, 2024 to stockholders of record on May 8, 2024.
Current wording
We paid $15.4 million and $15.2 million in dividends to our stockholders and eligible plan award holders for the six months ended June 30, 2024 and 2023, respectively. The declaration and payment of future dividends to common stockholders, including any special dividends that may be declared in the future, will be at the discretion of our Board of Directors (Board) and will depend upon many factors including our financial position, capital requirements of our operating subsidiaries, legal and regulatory requirements, and any other factors that our Board deems relevant. On July 31, 2024, the Board declared a quarterly dividend per share of $0.30, which is payable August 28, 2024 to stockholders of record on August 14, 2024.
Previous wording
We repurchased 123,073 shares of our common stock for $4.9 million during the three months ended March 31, 2024. Future repurchases of our common stock will be at the discretion of our Board and will depend upon many factors, including our financial position, capital requirements of our operating subsidiaries, general business and socioeconomic conditions, legal, tax, regulatory, and/or contractual restrictions, and any other factors that our Board deems relevant.
Current wording
We repurchased 461,789 shares of our common stock for $19.2 million during the three months ended June 30, 2024. Future repurchases of our common stock will be at the discretion of our Board and will depend upon many factors, including our financial position, capital requirements of our operating subsidiaries, general business and socioeconomic conditions, legal, tax, regulatory, and/or contractual restrictions, and any other factors that our Board deems relevant.
Previous wording
As of March 31, 2024, the capital resources available to us consisted of $1,018.9 million of stockholders’ equity and the $97.2 million Deferred Gain.
Current wording
As of June 30, 2024, the capital resources available to us consisted of $1,022.9 million of stockholders’ equity and the $95.3 million Deferred Gain.
Previous wording
We have entered into lease arrangements for certain equipment and facilities. As of March 31, 2024, we had lease payment obligations totaling $5.8 million, of which $1.8 million is payable within 12 months.
Current wording
We have entered into lease arrangements for certain equipment and facilities. As of June 30, 2024, we had lease payment obligations totaling $5.3 million, of which $1.8 million is payable within 12 months.
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Current report — wording carried from elsewhere
"Critical Accounting Estimates" in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report.