Employers Holdings Inc

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 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.

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 or future 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

We target small businesses, as we believe that this market is traditionally characterized by more attractive pricing, and stronger persistency when compared to the U.S. workers’ compensation insurance industry in general. We believe we can price our policies at levels that are competitive and profitable over the long-term given our expertise in underwriting and claims handling in this market segment. Our underwriting approach is to consistently underwrite small business accounts at appropriate and competitive prices without sacrificing long-term profitability and stability for short-term top-line revenue growth.

Current wording

We target small to mid-sized businesses, as we believe that this market is traditionally characterized by more attractive pricing, and stronger persistency when compared to the U.S. workers’ compensation insurance industry in general. We believe we can price our policies at levels that are competitive and profitable over the long-term given our expertise in underwriting and claims handling in this market segment. Our underwriting approach is to consistently underwrite small to mid-sized business accounts at appropriate and competitive prices without sacrificing long-term profitability and stability for short-term top-line revenue growth.

Previous 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:

Current wording

Our net income was $30.3 million and $90.3 million for the three and nine months ended September 30, 2024, respectively, compared to $14.0 million and $72.5 million for the corresponding periods of 2023. The key factors that affected our financial performance during the three and nine months ended September 30, 2024, compared to the same periods of 2023, included:

Previous 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.

Current wording

Our 2024 underwriting results reflect moderate increases in net premiums earned, as compared to the same periods of 2023, due to higher new and renewal business premiums, as well as favorable prior year loss reserve development and lower underwriting and general and administrative expenses. Our investment results benefited from strong net investment income and net realized and unrealized gains.

Previous 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.

Current wording

Our 2023 underwriting results reflect moderate increases in net premiums earned, as compared to the same periods of 2022, due to higher new and renewal business premiums and final audit premiums, as well as strong favorable prior year loss reserve development. Our investment results benefited from strong net investment income.

Previous wording

Our consolidated financial results of operations for the three and six months ended June 30, 2024 and 2023 are as follows:

Current wording

Our consolidated financial results of operations for the three and nine months ended September 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 and six months ended June 30, 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 nine months ended September 30, 2024 and 2023 are as follows:

Previous 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.

Current wording

(1) The LPT Agreement is a non-recurring transaction that no longer provides us with any 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 $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.

Current wording

Gross premiums written were $181.2 million and $599.9 million for the three and nine months ended September 30, 2024, compared to $196.2 million and $589.5 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 offset by lower final audit premiums and endorsements. We also closed another quarter with a record number of policies in-force and our renewal premiums benefited from continued strong retention rates experienced throughout the first nine months of 2024.

Previous 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.

Current wording

Net premiums written were $179.6 million and $594.8 million for the three and nine months ended September 30, 2024, compared to $194.5 million and $584.2 million for the corresponding periods of 2023. Reinsurance premiums ceded were $1.6 million and $5.1 million for the three and nine months ended September 30, 2024, compared to $1.7 million and $5.3 million for the corresponding periods of 2023.

Previous wording

Losses and LAE represents our largest expense item and includes claim payments made, amortization of the Deferred Gain, LPT Reserve Adjustments, LPT Contingent Commission Adjustments, estimates for future claim payments and changes in those estimates for current and prior periods, and costs associated with investigating, defending, and adjusting claims. The quality of our financial reporting depends in large part on accurately predicting our losses and LAE, which are inherently uncertain as they are estimates of the ultimate cost of individual claims based on actuarial estimation techniques.

Current wording

Losses and LAE represents our largest expense item and includes claim payments made, amortization of the Deferred Gain, Contingent Commission adjustments, estimates for future claim payments and changes in those estimates for current and prior periods, and costs associated with investigating, defending, and adjusting claims. The quality of our financial reporting depends in large part on accurately predicting our losses and LAE, which are inherently uncertain as they are estimates of the ultimate cost of individual claims based on actuarial estimation techniques.

Previous 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.

Current wording

Our current accident year loss and LAE estimates, excluding LPT, for the three and nine months ended September 30, 2024, as shown below, are largely consistent with those of the prior periods presented. We believe that our current accident year loss estimate is adequate; however, ultimate losses will not be known with any certainty for many years. Our current accident year loss and LAE ratios continue to reflect the impact of key business initiatives, including: 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

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 wording

The increase in our calendar year losses and LAE during the three months ended September 30, 2024, as compared to the same period of 2023, was primarily due to higher earned premiums and a slightly higher current accident year loss and LAE estimate. Favorable prior year loss reserve development on our assigned risk business totaled $0.1 million during each of the three months ended September 30, 2024 and 2023.

Previous wording

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 wording

The increase in our calendar year losses and LAE during the nine months ended September 30, 2024, as compared to the same period of 2023, was primarily due to higher earned premiums, a slightly higher current accident year loss and LAE estimate, and lower net favorable prior year loss reserve development. Favorable prior year loss reserve development on our voluntary risk business totaled $9.3 million and $20.0 million during the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

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 wording

The favorable prior year loss development on our voluntary business during the nine months ended September 30, 2024 resulted from 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.

Previous wording

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 wording

The favorable prior year loss development on our voluntary business during the nine months ended September 30, 2023 resulted from overall favorable loss experience, which related primarily to accident years 2020 and prior.

Previous 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.

Current wording

Our commission expense ratio was 14.1% for each of the three and nine month periods ended September 30, 2024, compared to 14.5% and 13.8% for the corresponding periods of 2023, and our commission expenses were $26.4 million and $78.7 million for the three and nine months ended September 30, 2024, respectively, compared to $26.7 million and $73.8 million for the corresponding periods of 2023. The decrease in our commission expense ratio for three months ended September 30, 2024 was primarily related to lower agency incentive accruals, which are specific to individual contracts and vary with agency targets. The increase in our commission expense ratio for nine months ended September 30, 2024 was primarily related to: (i) an increase in new business writings year-over-year; and (ii) a reduction in commission expense for uncollected premium recorded in the second quarter of 2023.

Previous wording

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 wording

Our underwriting and general and administrative expense ratio was 23.2% and 23.3% for the three and nine months ended September 30, 2024, respectively, compared to 23.6% and 25.0% for the corresponding periods of 2023, and our underwriting expenses were $43.2 million and $130.2 million for the three and nine months ended September 30, 2024, respectively, compared to $43.5 million and $133.7 million for the corresponding periods of 2023.

Previous wording

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 wording

The decreases in underwriting expenses for the nine months ended September 30, 2024, were primarily the result of decreases in professional fees of $4.9 million, depreciation and amortization of $3.3 million and marketing and advertising expenses of $2.0 million, partially offset by increases in the net CECL provision on premiums receivable of $4.8 million and compensation- related expenses of $2.3 million, each compared to the same period 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 meaningful contributor to the expense reduction for the three and nine months ended September 30, 2024.

Previous 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.

Current wording

Net investment income increased 2.7% and remained flat during the three and nine months ended September 30, 2024, compared to the same periods of 2023. The increase for the three months ended September 30, 2024 was primarily due to higher yields within the Company's fixed maturity portfolio. The consistent level of investment income for the nine months ended September 30, 2024, versus that of the prior year, was due to higher yields within the Company’s fixed maturity portfolio and its cash equivalents being partially offset by a lower invested balance of fixed maturity securities, as measured by amortized cost. The lower invested balances in the current period 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

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.

Current wording

Net realized and unrealized gains (losses) on investments were $10.9 million and $24.5 million for the three and nine months ended September 30, 2024, compared to $(7.1) million and $10.7 million for the corresponding periods of 2023. The net realized and unrealized gains on investments for the three months ended September 30, 2024 and 2023 included $12.8 million and $(5.9) million of net realized and unrealized gains (losses) on equity securities and other investments, respectively, and $1.9 million and $1.2 million of net realized losses on fixed maturity securities, respectively. The net realized and unrealized gains on investments for the nine months ended September 30, 2024 and 2023 included $30.8 million and $13.6 million of net realized and unrealized gains on equity securities and other investments, respectively, and $6.3 million and $2.9 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 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.

Current wording

The net investment gains and losses on our equity securities during the three and nine months ended September 30, 2024 were largely consistent with the performance of the U.S. equity markets. The net realized investment losses on our fixed maturity securities during the three and nine months ended September 30, 2024 were primarily the result of sales associated with the rebalancing of our fixed maturity investment portfolio partially offset by decreases of $0.5 million and $1.3 million in our allowance for CECL, respectively.

Previous 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.

Current wording

The net investment gains and losses on our equity securities during the three and nine months ended September 30, 2023 were largely consistent with the performance of the U.S. equity markets. The net realized investment losses on our fixed maturity securities during the three and nine months ended September 30, 2023 were largely concentrated in certain holdings in the financial and banking sectors, and were partially offset by decreases of $1.1 million and $1.3 million in our allowance for CECL, respectively.

Previous wording

Other income (loss) consists of net gains and losses on fixed assets, non-investment interest, and other miscellaneous income.

Current wording

Other income (loss) consists of net gains and losses on fixed assets, non-investment interest, and other miscellaneous income and expense items.

Previous 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.

Current wording

Interest and financing expenses were less than $0.1 million and $0.1 million for the three and nine months ended September 30, 2024, compared to $1.0 million and $5.2 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

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 wording

During the nine months ended September 30, 2023, we recorded a $9.4 million 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 related 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.

Previous 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.

Current wording

Income tax expense was $6.4 million and $21.8 million for the three and nine months ended September 30, 2024, respectively, compared to $3.4 million and $17.8 million for the corresponding periods of 2023. The effective tax rates were 17.4% and 19.4% for the three and nine months ended September 30, 2024, respectively, compared to 19.5% and 19.7% 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, Deferred Gain amortization and related adjustments, and tax credits utilized.

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, 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.

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 required 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 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 wording

During the third quarter of 2024, EPIC made a $23.2 million dividend payment to EGI, which in turn distributed that amount to EHI. As a result of that dividend payment, EPIC cannot pay dividends for the remainder of 2024 without prior regulatory approval.

Previous wording

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 wording

During the third quarter of 2024, EAC made a $22.4 million dividend payment to EGI, which in turn distributed that amount to EHI. As a result of that dividend payment, EAC cannot pay dividends for the remainder of 2024 without prior regulatory approval.

Previous 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.

Current wording

Total cash and investments at EHI were $76.8 million at September 30, 2024, consisting of $31.1 million of cash and cash equivalents, $20.5 million of fixed maturity securities, and $25.2 million of equity securities.

Previous wording

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 wording

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 for each of the three and nine months ended September 30, 2024.

Previous wording

EHI had no borrowings under the Credit Agreement during the three months ended June 30, 2024.

Current wording

EHI had no borrowings under the Credit Agreement during the nine months ended September 30, 2024.

Previous 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.

Current wording

Total cash and investments held by our operating subsidiaries was $2,524.7 million at September 30, 2024, consisting of $112.4 million of cash and cash equivalents, and restricted cash, $30.6 million of short-term investments, $2,045.3 million of fixed maturity securities, $236.7 million of equity securities, and $99.7 million of other invested assets. Sources of immediate and unencumbered liquidity at our operating subsidiaries as of September 30, 2024 consisted of $112.2 million of cash and cash equivalents, $231.0 million of publicly traded equity securities whose proceeds are available within two business days and $690.8 million of highly liquid fixed maturity securities whose proceeds are also 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

All of our insurance subsidiaries are members of the FHLB. Membership allows our subsidiaries access to collateralized advances, which may be used to support and enhance liquidity management. The amount of advances that may be taken is dependent on statutory admitted assets on a per company basis.

Current wording

All of our insurance subsidiaries are members of the FHLB. Membership allows our subsidiaries access to collateralized advances, which may be used to support and enhance liquidity management. The amount of advances that may be taken is dependent on our statutory admitted assets on a per company basis.

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 $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.

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 $746.1 million and $748.1 million were on deposit at September 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 September 30, 2024 and December 31, 2023.

Previous 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.

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 currently meets our needs.

Previous wording

Certain reinsurance contracts require company funds to be held in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities we have assumed. The fair value of fixed maturity securities held in trust for the benefit of our ceding reinsurers was $3.0 million at both June 30, 2024 and December 31, 2023, respectively.

Current wording

Certain reinsurance contracts require funds owned by us to be held in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities we have assumed. The fair value of fixed maturity securities held in trust for the benefit of our ceding reinsurers was $3.1 million and $3.0 million at September 30, 2024 and December 31, 2023, respectively.

Previous wording

We monitor the cash flows of each of our subsidiaries individually, as well as collectively as a consolidated group. We use trend and variance analyses to project future cash needs, making adjustments to our forecasts as appropriate.

Current wording

We monitor the cash flows of each of our subsidiaries individually, as well as collectively as a consolidated group. We use trend and variance analyses to project future cash needs, making adjustments to our cash forecasts as appropriate.

Previous wording

The table below shows our net cash flows for the six months ended:

Current wording

The table below shows our net cash flows for the nine months ended: