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 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.

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, potential implications of increased tariffs, 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 are a Nevada holding company. Through our insurance subsidiaries, we provide workers’ compensation insurance coverage to small and select businesses engaged in low-to-medium hazard industries. Workers’ compensation insurance is provided under a statutory system wherein most employers are required to provide coverage for their employees’ medical, disability, vocational rehabilitation, and/or death benefit costs for work-related injuries or illnesses. We provide workers’ compensation insurance throughout most of the United States, with a concentration in California, where 45% of our in-force premiums are generated. Our revenues primarily consist of net premiums earned, net investment income, and net realized and unrealized gains and losses on investments.

Current wording

We are a Nevada holding company. Through our insurance subsidiaries, we provide workers’ compensation insurance coverage to small and mid-sized businesses engaged in low-to-medium hazard industries. Workers’ compensation insurance is provided under a statutory system wherein most employers are required to provide coverage for their employees’ medical, disability, vocational rehabilitation, and/or death benefit costs for work-related injuries or illnesses. We provide workers’ compensation insurance throughout most of the United States, with a concentration in California, where 46% of our in-force premiums are generated. Our revenues primarily consist of net premiums earned, net investment income, and net realized and unrealized gains and losses on investments.

Previous 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.

Current wording

We target small to mid-sized businesses, as we believe that this market is traditionally characterized by higher profitability 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 revenue growth.

Previous wording

We believe we have a cost-effective and scalable information technology infrastructure that complements our geographic reach and business model. We continue to invest in technology to automate business processes and further develop our data analytic capabilities, which we believe will enable us to reduce our operating costs over the long-term and set a foundation for our future needs. Our technology saves our insurance agents and brokers, and our policyholders, considerable time and maintains our competitiveness in our target markets.

Current wording

We believe we have a cost-effective and scalable information technology infrastructure that complements our geographic reach and business model. We continue to invest in technology to automate business processes and further develop our data analytic capabilities, which we believe will enable us to reduce our operating costs over the long-term and set a foundation for our future needs. We believe our technology saves our insurance agents and brokers, and our policyholders, considerable time and maintains our competitiveness in our target markets.

Previous wording

We also continue to execute a number of ongoing business initiatives, including: achieving internal and customer-facing business process excellence; further diversifying our risk exposure across geographic markets and economic sectors, when appropriate; appetite expansion; and utilizing a multi-company pricing platform and territory-specific pricing.

Current wording

We also continue to execute a number of ongoing business initiatives, including: achieving internal and customer-facing business process excellence and efficiency; delivering self-service options to policyholders, agents, and injured workers; further diversifying our risk exposure across geographic markets and economic sectors; and expanding our appetite expansion.

Previous 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:

Current wording

Our net income was $12.8 million for the three months ended March 31, 2025 compared to $28.3 million for the corresponding period of 2024. The key factors that affected our financial performance during the three months ended March 31, 2025, compared to the same period of 2024, included:

Previous wording

•Net realized and unrealized gains (losses) on investments of $10.9 million and $24.5 million, compared to $(7.1) million and $10.7 million.

Current wording

•Net realized and unrealized (losses) gains on investments of $(12.8) million compared to $11.4 million;

Previous 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.

Current wording

Our 2024 underwriting results reflect moderate increases in net premiums earned, as 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.

Previous wording

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

Current wording

Our consolidated financial results of operations for the three months ended March 31, 2025 and 2024 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 nine months ended September 30, 2024 and 2023 are as follows:

Current wording

Underwriting income or loss is determined by deducting losses and LAE, commission expense, and underwriting expenses from net premiums earned. Our underwriting results for the three months ended March 31, 2025 and 2024 are as follows:

Previous 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.

Current wording

Net premiums written were $210.3 million for the three months ended March 31, 2025, compared to $209.1 million for the corresponding period of 2024. Reinsurance premiums ceded were $1.8 million for each of the three months ended March 31, 2025 and 2024.

Previous 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.

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 accident years, and costs associated with investigating, defending, and adjusting claims. The accuracy of our financial reporting depends in large part on determining our losses and LAE reserves, 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 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.

Current wording

We analyze our loss and LAE ratios on both a calendar year and accident year basis. Our current accident year loss and LAE estimates, excluding LPT, for the three months ended March 31, 2025, as shown below, are slightly increased as compared to those of the prior period 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 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 table below reflects prior accident year loss and LAE reserve adjustments and the impact to loss ratio.

Current wording

The table below reflects current and prior accident year loss and LAE reserve adjustments, the impact of the LPT, and the resulting impact to our loss ratio.

Previous 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.

Current wording

The increase in our calendar year losses and LAE during the three months ended March 31, 2025, as compared to the same period of 2024, was primarily due to a higher current accident year loss and LAE estimate as unfavorable loss trends have been observed. Prior accident year unfavorable loss reserve development totaled $1.3 million during the three months ended March 31, 2025, which included $0.6 million net unfavorable loss reserve development on our assigned risk business. Prior accident year favorable loss reserve development on our assigned risk business totaled $0.1 million during three months ended March 31, 2024.

Previous wording

Commission expenses include direct commissions to our agents and brokers, including our partnerships and alliances, for the premiums that they produce for us, as well as agency incentive payments, other marketing costs, and fees.

Current wording

Commission expense includes direct commissions to our agents and brokers, including our partnerships and alliances, for the premiums that they produce for us, as well as agency incentive payments, other marketing costs, and fees.

Previous wording

Underwriting and general and administrative expenses represent those costs that we incur to underwrite and maintain the insurance policies we issue, excluding commissions. Variable underwriting expenses, such as premium taxes, policyholder dividends, and those expenses that vary directly with the production of new or renewal business, are recognized as the associated premiums are earned. Fixed underwriting expenses, such as the operating expenses of EHI and its subsidiaries, do not vary directly with the production of new or renewal business and are recognized as incurred.

Current wording

Underwriting expenses represent those costs required to run the business, including costs incurred to underwrite and maintain the insurance policies we issue, excluding commissions. Variable underwriting expenses, such as premium taxes, policyholder dividends, and other expenses that vary directly with the production of new or renewal business, are recognized as the associated written premiums are earned. Fixed underwriting expenses, such as the operating expenses of EHI and its subsidiaries, do not vary directly with the production of new or renewal business and are recognized as incurred.

Previous 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.

Current wording

Our underwriting expense ratio was 23.4% for the three months ended March 31, 2025, compared to 25.0% for the corresponding period of 2024, and our underwriting expenses were $42.9 million for the three months ended March 31, 2025, compared to $46.2 million for the corresponding period of 2024.

Previous wording

The decreases in underwriting expenses for the three months ended September 30, 2024, were primarily the result of decreases in professional fees of $1.7 million and depreciation and amortization of $1.4 million, partially offset by increases in the net CECL provision on premiums receivable of $2.3 million, and premium taxes and assessments of $0.3 million, each compared to the same period of 2023.

Current wording

The decrease in underwriting expenses for the three months ended March 31, 2025 was primarily the result of decreases in the net CECL provision on premiums receivable of $2.1 million and compensation-related expenses of $1.6 million, each compared to the same period of 2024.

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 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).

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 (losses) gains on investments on our Consolidated Statements of Comprehensive Income (Loss).

Previous 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.

Current wording

Net realized and unrealized (losses) gains on investments were $(12.8) million for the three months ended March 31, 2025, compared to $11.4 million for the corresponding period of 2024. The net realized and unrealized (losses) gains on investments for the three months ended March 31, 2025 and 2024 included $(11.9) million and $12.3 million of net realized and unrealized (losses) gains on equity securities and other investments, respectively, and $0.9 million of net realized losses on fixed maturity securities for both periods.

Previous 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.

Current wording

The net investment losses on our equity securities during the three months ended March 31, 2025 were largely consistent with the performance of the U.S. equity markets. The net investment losses on our other investments during the three months ended March 31, 2025 included the returns from our investments in private equity limited partnerships. The net realized investment losses on our fixed maturity securities during the three months ended March 31, 2025 included a $0.3 million increase in our allowance for CECL.

Previous 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.

Current wording

The net investment gains on our equity securities during the three months ended March 31, 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 months ended March 31, 2024 included a $0.5 million increase in our allowance for CECL.

Previous wording

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

Current wording

Other income 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 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.

Current wording

Interest and financing expenses include fees and interest associated with our credit facilities, finance lease interest, and other financing fees.

Previous 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.

Current wording

Interest and financing expenses were $0.1 million for the three months ended March 31, 2025, compared to less than $0.1 million for the corresponding period of 2024.

Previous 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.

Current wording

Income tax expense was $3.1 million for the three months ended March 31, 2025, compared to $7.0 million for the corresponding period of 2024. The effective tax rates were 19.5% for the three months ended March 31, 2025, compared to 19.8% for the corresponding period of 2024. 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 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.

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 (iv) 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

EHI is a holding company and its ability to fund its operations is contingent upon its existing capital and the ability of its subsidiaries to pay it dividends. Payment of dividends by EHI's insurance subsidiaries is restricted by state insurance laws and regulations, including laws establishing minimum solvency and liquidity thresholds. EHI requires cash to pay dividends to its stockholders, repurchase its common stock, provide additional surplus to its insurance subsidiaries, and fund its operating expenses.

Current wording

EHI is a holding company and its ability to fund its operations is contingent upon its existing capital and the ability of its subsidiaries to pay it dividends. Any payments of dividends by our insurance subsidiaries are restricted by state insurance laws and regulations, including laws establishing minimum solvency and liquidity thresholds. EHI requires cash to pay dividends to its stockholders, repurchase its common stock, provide additional surplus to its insurance subsidiaries, and fund its operating expenses.

Previous 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.

Current wording

During the first quarter of 2025, EICN made a $14.0 million dividend payment to EGI, which in turn distributed that amount to EHI. As a result of that dividend payment, EICN cannot pay dividends for the remainder of 2025 without prior regulatory approval.

Previous 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.

Current wording

During the first quarter of 2025, ECIC made a $23.5 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 2025 without prior regulatory approval.

Previous 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.

Current wording

Total cash and investments at the holding company were $68.0 million at March 31, 2025, consisting of $35.9 million of cash and cash equivalents, $7.5 million of fixed maturity securities, and $24.6 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 for each of the three and nine months ended September 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 was $0.1 million for three months ended March 31, 2025.

Previous wording

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

Current wording

EHI had no borrowings under the Credit Agreement during the three months ended March 31, 2025.

Previous wording

The primary sources of cash for our operating subsidiaries, which include our insurance and other operating subsidiaries, are premium collections, investment income, sales and maturities of investments, and reinsurance recoveries. The primary uses of cash for our operating subsidiaries are payments of losses and LAE, commission expenses, underwriting and general and administrative expenses, ceded reinsurance, investment purchases and dividends paid to their parent.

Current wording

The primary sources of cash for our operating subsidiaries, which include our insurance and other operating subsidiaries, are premium collections, investment income, sales and maturities of investments, and reinsurance recoveries. The primary uses of cash for our operating subsidiaries are payments of losses and LAE, commission expense, underwriting expenses, ceded reinsurance, investment purchases and dividends paid to their parent.

Previous 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.

Current wording

Total cash and investments held by our operating subsidiaries was $2,469.6 million at March 31, 2025, consisting of $64.7 million of cash and cash equivalents, and restricted cash, $2,079.9 million of fixed maturity securities, $229.6 million of equity securities, and $95.4 million of other invested assets. Sources of immediate and unencumbered liquidity at our operating subsidiaries as of March 31, 2025 consisted of $64.5 million of cash and cash equivalents, $223.9 million of publicly traded equity securities whose proceeds are available within two business days and $684.1 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 our statutory admitted assets on a per company basis.

Current wording

Each 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 $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.

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 $649.3 million and $630.9 million were on deposit at March 31, 2025 and December 31, 2024, 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 $170.0 million of securities on deposit at both March 31, 2025 and December 31, 2024.

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 currently meets our needs.

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, including a maximum any one life limit of $20.0 million, subject to certain exclusions. We believe that our reinsurance program currently meets our needs.

Previous 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.

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 $3.0 million at both March 31, 2025 and December 31, 2024.