Employers Holdings, Inc. Reports Third Quarter 2022 Financial Results; Declares Quarterly Cash Dividend of $0.26 per Share

Employers Holdings, Inc. (the “Company”) (NYSE:EIG), a holding company with subsidiaries that are specialty providers of workers' compensation insurance and services focused on select, small businesses engaged primarily in low-to-medium hazard industries, today reported financial results for its third quarter ended September 30, 2022.

Financial Highlights

Gross premiums written of $188.6 million, up 24% year-over-year;
Net premiums earned of $178.7 million, up 21% year-over-year;
Record number of ending policies in-force of 120,147, up 9.4% year-over-year;
Net investment income of $23.7 million, up 29% year-over-year;
Net income of $19.1 million, $0.70 per diluted share;
Adjusted net income of $15.5 million, $0.56 per diluted share;
The Company repurchased 186,799 shares of its common stock at an average price of $39.72 per share.

Management Commentary

Chief Executive Officer Katherine Antonello commented: “I am very pleased with our third quarter 2022 results. Our written and earned premiums have risen sharply in both the current quarter and the first nine months, and for the eighth consecutive quarter we achieved a record number of policies in-force. This growth resulted from strong new and renewal business writings within our Employers segment, robust new business writings within our Cerity segment and further audit premium recognition.

We maintained our current accident year loss and LAE ratio on voluntary business at 64.0%, largely consistent with the 63.5% we recorded throughout 2021. We did not adjust our loss and LAE reserves this period as our third quarter reserve review was consistent with our expectations. We will evaluate our prior year reserves in more detail at year-end when we routinely perform a full reserve study.”

Ms. Antonello continued, "We remain committed to maintaining the highest level of underwriting discipline as we continue to thoughtfully execute our growth strategy for both Employers and Cerity. The additional classes of business that we are writing are complementary to our business model and are contributing nicely to our top-line growth. In addition, our consolidated underwriting expense ratio of 23.4% this quarter is the lowest it has been since the fourth quarter of 2018.

Our Cerity operations, which offers digital workers' compensation insurance solutions directly to consumers, experienced meaningful premium growth again this quarter, due to both its appetite expansion and its collaboration with Intuit’s QuickBooks and, more recently, Thimble. Cerity expects to develop additional strategic opportunities which will support our growth initiatives by attracting an untapped segment of our target market.

The sharp increases in market interest rates that have occurred throughout the first nine months of 2022 have significantly benefited our net investment income while generating unrealized investment losses from our short duration fixed maturity portfolio. When coupled with unrealized losses from our equity portfolio, the impact was a decline in our book value and book value per share metrics.

Our balance sheet and underwriting capital remain very strong and are highly supportive of our continued growth and success.”

Summary ofThird Quarter 2022 Results

(All comparisons vs. the third quarter of 2021, unless noted otherwise).

Gross premiums written were $188.6 million, an increase of 24%. The increase was primarily due to higher new and renewal premiums and higher final audit premiums. Net premiums earned were $178.7 million, an increase of 21%.

Losses and loss adjustment expenses were $112.3 million, an increase of 23%. The increase was primarily due to higher earned premiums. The Company did not recognize any prior year loss reserve development on its voluntary business during the third quarters of 2022 and 2021.

Commission expenses were $25.3 million, an increase of 27%. The increase was due primarily to higher earned premiums and higher 2022 agency incentive accruals.

Underwriting and general and administrative expenses were $41.9 million, an increase of 12%. The increase resulted primarily from higher premium taxes, assessments and bad debt expenses, each of which vary with earned premium.

Net investment income was $23.7 million, an increase of 29%. The increase was primarily due to higher bond yields and higher invested balances of fixed maturity securities and cash and cash equivalents, as measured by amortized cost.

Income tax expense was $4.7 million (19.7% effective rate) versus $3.6 million (19.4% effective rate). 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.

The Company’s book value per share of $33.79 and book value per share including the Deferred Gain of $37.77 decreased by 5% and 4% during the third quarter of 2022, respectively, computed after taking into account dividends declared. These measures were adversely impacted by $60.3 million of after-tax unrealized losses arising from fixed maturity securities (which are reflected on the balance sheet) and $2.4 million of net after tax unrealized losses arising from equity securities and other investments (which are reflected on the income statement).

Summary of Results by Segment

(see page 14 of the Financial Supplement for a description of our reportable segments. All comparisons vs. the third quarter of 2021, unless noted otherwise).

Employers Segment

The Employers segment reported net income before income taxes of $26.1 million versus net income of $22.4 million.

Highlights include the following:

– Underwriting income of $3.2 million versus $2.8 million;

– Earned premium of $177.9 million versus $146.9 million;

– Combined ratio of 98.3% versus 98.1%;

– Current accident year loss and LAE ratio of 64.1% versus 63.4%;

– Calendar year loss and LAE ratio of 64.0% versus 63.4%;

– Commission expense ratio of 14.2% versus 13.5%;

– Underwriting expense ratio of 20.1% versus 21.2%;

– Net investment income of $21.4 million versus $17.5 million; and

– Net realized and unrealized gains on investments recorded through the income statement of $2.4 million versus net gains of $3.1 million.

Cerity Segment

The Cerity segment reported a net loss before income taxes of $2.4 million versus a net loss of $2.7 million.

Highlights include the following:

– Underwriting loss of $3.3 million in each period;

– Written premium of $1.5 million versus $0.3 million;

– Earned premium of $0.8 million versus $0.2 million;

– Underwriting expenses of $3.4 million versus $3.3 million;

– Net investment income of $1.2 million versus $0.7 million; and

– Net realized and unrealized losses on investments recorded through the income statement of $0.3 million versus net losses of $0.1 million.

Corporate and Other

Corporate and Other activities reported net income before income taxes of $0.1 million versus a net loss of $1.1 million.

Highlights include the following:

– LPT amortization, which served to reduce losses and LAE, of $2.1 million in each period;

– General and administrative expenses of $2.8 million versus $3.0 million;

– Net investment income of $1.1 million versus $0.2 million; and

– Net realized and unrealized losses on investments recorded through the income statement of $0.2 million versus net losses of $0.3 million.

Share Repurchases and Fourth Quarter 2022 Dividend Declarations

During the third quarter of 2022, the Company repurchased 186,799 shares of its common stock at an average price of $39.72 per share. The Company currently has a remaining share repurchase authorization of $49.1 million.

On October 26, 2022, the Board of Directors declared a third quarter 2022 dividend of $0.26 per share. The dividend is payable on November 23, 2022 to stockholders of record as of November 9, 2022.

Earnings Conference Call and Webcast

The Company will host a conference call on Friday, October 28, 2022, at 11:00 a.m. Eastern Daylight Time / 8:00 a.m. Pacific Daylight Time.

To participate in the live conference call you must first register here. Once registered you will receive dial-in numbers and a unique PIN number.

The webcast will be accessible on the Company’s web site at www.employers.com through the “Investors” link. An archived version of the webcast will be accessible on the Company’s website following the live call.

Reconciliation of Non-GAAP Financial Measures to GAAP

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

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

Forward-Looking Statements

In this press release, the Company and its management discuss and make statements based on currently available information regarding their intentions, beliefs, current expectations, and projections of, among other things: the Company's future performance, economic or market conditions, including the evolving nature of the COVID-19 pandemic, current levels of inflation, labor market expectations, catastrophic events or geo-political conditions, legislative or regulatory actions or court decisions taken in response to the COVID-19 pandemic or otherwise, business growth, retention rates, loss costs, claim trends and the impact of key business initiatives, future technologies and planned investments. Certain of these statements may constitute “forward-looking” statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often identified by words such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “target,” “project,” “intend,” “believe,” “estimate,” “predict,” “potential,” “pro forma,” “seek,” “likely,” or “continue,” or other comparable terminology and their negatives. The Company and its management caution investors that such forward-looking statements are not guarantees of future performance. Risks and uncertainties are inherent in the Company’s future performance. Factors that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements include, among other things, those discussed or identified from time to time in the Company’s public filings with the U.S. Securities and Exchange Commission (the "SEC"), including the risks detailed in the Company's Quarterly Reports on Form 10-Q and the Company's Annual Reports on Form 10-K. Except as required by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Filings with the SEC

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

About Employers Holdings, Inc.

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

Employers Holdings, Inc.

Third Quarter 2022

Financial Supplement

EMPLOYERS HOLDINGS, INC. Table of Contents

Page

1		Consolidated Financial Highlights

2		Summary Consolidated Balance Sheets

3		Summary Consolidated Income Statements

4		Net Income (Loss) Before Income Taxes by Segment

8		Return on Equity

9		Roll-forward of Unpaid Losses and LAE

10		Consolidated Investment Portfolio

11		Book Value Per Share

12		Earnings Per Share

13		Non-GAAP Financial Measures

14		Description of Reportable Segments

EMPLOYERS HOLDINGS, INC. Consolidated Financial Highlights (unaudited) $ in millions, except per share amounts

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2022			2021			% change		2022			2021			% change
*Selected financial highlights:*
Gross premiums written	$	188.6		$	152.3		24	%	$	540.4		$	447.7		21	%
Net premiums written		186.8			149.8		25			535.3			442.7		21
Net premiums earned		178.7			147.1		21			494.1			418.0		18
Net investment income		23.7			18.4		29			62.8			54.9		14
Net income (loss) before impact of the LPT⁽¹⁾		17.0			12.9		32			(5.0	)		58.4		n/m
Adjusted net income⁽¹⁾		15.5			11.6		34			46.7			38.3		22
Net income (loss) before income taxes		23.8			18.6		28			(0.1	)		78.6		n/m
Net income		19.1			15.0		27			1.3			64.5		(98	)
Comprehensive (loss) income		(45.1	)		5.6		n/m			(218.2	)		27.8		n/m
Total assets										3,708.7			3,801.5		(2	)
Stockholders' equity										919.0			1,189.9		(23	)
Stockholders' equity including the Deferred Gain⁽²⁾										1,027.1			1,309.1		(22	)
Adjusted stockholders' equity⁽²⁾										1,186.0			1,230.7		(4	)
Annualized adjusted return on stockholders' equity⁽³⁾		5.2	%		3.8	%	37	%		5.1	%		4.2	%	21	%
*Amounts per share:*
Cash dividends declared per share	$	0.26		$	0.25		4	%	$	1.77		$	0.75		136	%
Earnings per share⁽⁴⁾		0.70			0.53		32			0.05			2.24		(98	) %
Earnings (loss) per share before impact of the LPT⁽⁴⁾		0.62			0.45		38			(0.18	)		2.03		n/m
Adjusted earnings per diluted share⁽⁴⁾		0.56			0.41		37			1.69			1.33		27
Book value per share⁽²⁾										33.79			42.55		(21	)
Book value per share including the Deferred Gain⁽²⁾										37.77			46.81		(19	)
Adjusted book value per share⁽²⁾										43.61			44.01		(1	)
*Financial information by Segment⁽⁵⁾:*
Net income (loss) before income taxes
Employers	$	26.1		$	22.4		17	%	$	16.5		$	91.6		(82	) %
Cerity		(2.4	)		(2.7	)	11			(8.2	)		(7.2	)	(14	)
Corporate and Other		0.1			(1.1	)	n/m			(8.4	)		(5.8	)	(45	)

n/m - not meaningful
(1) See Page 3 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures.
(2)See Page 11 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures.
(3) See Page 8 for calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures.
(4) See Page 12 for description and calculations and Page 13 for information regarding our use of Non-GAAP Financial Measures.
(5) See Pages 4-7 for details and Page 14 for a description of our reportable segments.

EMPLOYERS HOLDINGS, INC. Summary Consolidated Balance Sheets (unaudited) $ in millions, except per share amounts

	September 30, 2022			December 31, 2021
ASSETS
Investments, cash and cash equivalents	$	2,630.3		$	2,811.3
Accrued investment income		19.7			14.5
Premiums receivable, net		301.0			244.7
Reinsurance recoverable, net of allowance, on paid and unpaid losses and LAE		463.1			483.8
Deferred policy acquisition costs		49.7			43.7
Deferred income tax asset, net		71.2			—
Contingent commission receivable—LPT Agreement		13.9			13.9
Other assets		159.8			171.3
Total assets	$	3,708.7		$	3,783.2

LIABILITIES
Unpaid losses and LAE	$	1,979.9		$	1,981.2
Unearned premiums		345.8			304.7
Commissions and premium taxes payable		53.4			42.1
Deferred Gain		108.1			114.4
FHLB Advances⁽¹⁾		182.5			—
Deferred income tax liability, net		—			7.7
Other liabilities		120.0			120.0
Total liabilities	$	2,789.7		$	2,570.1

STOCKHOLDERS' EQUITY
Common stock and additional paid-in capital	$	413.5		$	411.3
Retained earnings		1,290.4			1,338.5
Accumulated other comprehensive (loss) income, net		(158.9	)		60.6
Treasury stock, at cost		(626.0	)		(597.3	)
Total stockholders’ equity		919.0			1,213.1
Total liabilities and stockholders’ equity	$	3,708.7		$	3,783.2

Stockholders' equity including the Deferred Gain ⁽²⁾	$	1,027.1		$	1,327.5
Adjusted stockholders' equity ⁽²⁾		1,186.0			1,266.9
Book value per share ⁽²⁾	$	33.79		$	43.73
Book value per share including the Deferred Gain⁽²⁾		37.77			47.85
Adjusted book value per share ⁽²⁾		43.61			45.67

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

EMPLOYERS HOLDINGS, INC. Summary Consolidated Income Statements (unaudited) $ in millions

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Revenues:
Net premiums earned	$	178.7		$	147.1		$	494.1		$	418.0
Net investment income		23.7			18.4			62.8			54.9
Net realized and unrealized gains (losses) on investments⁽¹⁾		1.9			2.7			(65.5	)		29.6
Other income		0.1			0.1			0.3			0.8
Total revenues		204.4			168.3			491.7			503.3
Expenses:
Losses and LAE incurred		(112.3	)		(91.2	)		(299.7	)		(244.5	)
Commission expense		(25.3	)		(19.9	)		(69.9	)		(54.7	)
Underwriting and general and administrative expenses		(41.9	)		(37.4	)		(120.6	)		(121.0	)
Interest and financing expenses		(1.1	)		(0.1	)		(1.6	)		(0.4	)
Other expenses		—			(1.1	)		—			(4.1	)
Total expenses		(180.6	)		(149.7	)		(491.8	)		(424.7	)
Net income (loss) before income taxes		23.8			18.6			(0.1	)		78.6
Income tax (expense) benefit		(4.7	)		(3.6	)		1.4			(14.1	)
Net income		19.1			15.0			1.3			64.5
Unrealized AFS investment losses arising during the period, net of tax⁽²⁾		(60.3	)		(8.8	)		(222.2	)		(33.8	)
Reclassification adjustment for net realized AFS investment (gains) losses in net income, net of tax⁽²⁾		(3.9	)		(0.6	)		2.7			(2.9	)
Total comprehensive (loss) income	$	(45.1	)	$	5.6		$	(218.2	)	$	27.8
Net income	$	19.1		$	15.0		$	1.3		$	64.5
Amortization of the Deferred Gain - losses		(1.7	)		(1.7	)		(5.1	)		(5.0	)
Amortization of the Deferred Gain - contingent commission		(0.4	)		(0.4	)		(1.2	)		(1.1	)
Net income (loss) before impact of the LPT Agreement ⁽³⁾		17.0			12.9			(5.0	)		58.4
Net realized and unrealized losses (gains) on investments		(1.9	)		(2.7	)		65.5			(29.6	)
Severance costs and asset impairment charges		—			1.1			—			4.1
Income tax expense (benefit) related to items excluded from Net income or loss		0.4			0.3			(13.8	)		5.4
Adjusted net income	$	15.5		$	11.6		$	46.7		$	38.3

(1) Includes net realized and unrealized (losses) gains on equity securities and other investments of $(3.1) million and $1.9 million for the three months ended September 30, 2022 and 2021, respectively, and $(62.1) million and $25.9 million for the nine months ended September 30, 2022 and 2021, respectively.
(2) AFS = Available for Sale securities.
(3) See Page 13 regarding our use of Non-GAAP Financial Measures.

EMPLOYERS HOLDINGS, INC. Net Income (Loss) Before Income Taxes by Segment ⁽¹⁾ (unaudited) $ in millions

		Employers			Cerity			Corporate and Other			Consolidated
Three Months Ended September 30, 2022
Gross premiums written		$	187.1		$	1.5		$	—		$	188.6
Net premiums written			185.3			1.5			—			186.8

Net premiums earned	A		177.9			0.8			—			178.7
Net investment income			21.4			1.2			1.1			23.7
Net realized and unrealized gains (losses) on investments			2.4			(0.3	)		(0.2	)		1.9
Other income			0.1			—			—			0.1
Total revenues			201.8			1.7			0.9			204.4

Losses and LAE incurred ⁽²⁾	B		(113.8	)		(0.6	)		2.1			(112.3	)
Commission expense	C		(25.2	)		(0.1	)		—			(25.3	)
Underwriting and general and administrative expenses	D		(35.7	)		(3.4	)		(2.8	)		(41.9	)
Interest and financing expenses			(1.0	)		—			(0.1	)		(1.1	)
Total expenses			(175.7	)		(4.1	)		(0.8	)		(180.6	)
Net income (loss) before income taxes		$	26.1		$	(2.4	)	$	0.1		$	23.8

Underwriting income (loss)	A+B+C+D		3.2			(3.3	)

Loss and LAE expense ratio:
Current year			64.1	%		n/m
Prior years			(0.1	)		—
Loss and LAE ratio			64.0			n/m
Commission expense ratio			14.2			n/m
Underwriting expense ratio			20.1			n/m
Combined ratio			98.3	%		n/m

n/m - not meaningful
(1) See Page 14 for a description of our reportable segments
(2) Losses and LAE in Corporate and Other represent the impact of the LPT Agreement

EMPLOYERS HOLDINGS, INC. Net Income Before Income Taxes by Segment ⁽¹⁾ (unaudited) $ in millions

		Employers			Cerity			Corporate and Other			Consolidated
Three Months Ended September 30, 2021
Gross premiums written		$	152.0		$	0.3		$	—		$	152.3
Net premiums written			149.5			0.3			—			149.8

Net premiums earned	A		146.9			0.2			—			147.1
Net investment income			17.5			0.7			0.2			18.4
Net realized and unrealized gains (losses) on investments			3.1			(0.1	)		(0.3	)		2.7
Other income			0.1			—			—			0.1
Total revenues			167.6			0.8			(0.1	)		168.3

Losses and LAE incurred ⁽²⁾	B		(93.1	)		(0.2	)		2.1			(91.2	)
Commission expense	C		(19.9	)		—			—			(19.9	)
Underwriting and general and administrative expenses	D		(31.1	)		(3.3	)		(3.0	)		(37.4	)
Interest and financing expenses			—			—			(0.1	)		(0.1	)
Other expenses			(1.1	)		—			—			(1.1	)
Total expenses			(145.2	)		(3.5	)		(1.0	)		(149.7	)
Net income (loss) before income taxes		$	22.4		$	(2.7	)	$	(1.1	)	$	18.6

Underwriting income (loss)	A+B+C+D	$	2.8		$	(3.3	)

Loss and LAE expense ratio:
Current year			63.4	%		n/m
Prior years			—			—
Loss and LAE ratio			63.4			n/m
Commission expense ratio			13.5			n/m
Underwriting expense ratio			21.2			n/m
Combined ratio			98.1	%		n/m

n/m - not meaningful
(1) See Page 14 for a description of our reportable segments
(2) Losses and LAE in Corporate and Other represent the impact of the LPT Agreement

EMPLOYERS HOLDINGS, INC. Net Income (Loss) Before Income Taxes by Segment ⁽¹⁾ (unaudited) $ in millions

		Employers	Cerity	Corporate and Other	Consolidated
Nine Months Ended September 30, 2022
Gross premiums written		$ 536.8	$ 3.6	$ —	$ 540.4
Net premiums written		531.7	3.6	—	535.3

Net premiums earned	A	492.1	2.0	—	494.1
Net investment income		57.7	2.7	2.4	62.8
Net realized and unrealized losses on investments		(56.0)	(1.6)	(7.9)	(65.5)
Other income		0.3	—	—	0.3
Total revenues		494.1	3.1	(5.5)	491.7

Losses and LAE incurred ⁽²⁾	B	(304.7)	(1.3)	6.3	(299.7)
Commission expense	C	(69.8)	(0.1)	—	(69.9)
Underwriting and general and administrative expenses	D	(101.8)	(9.9)	(8.9)	(120.6)
Interest and financing expenses		(1.3)	—	(0.3)	(1.6)
Total expenses		(477.6)	(11.3)	(2.9)	(491.8)
Net income (loss) before income taxes		$ 16.5	$ (8.2)	$ (8.4)	$ (0.1)

Underwriting income (loss)	A+B+C+D	15.8	(9.3)

Loss and LAE expense ratio:
Current year		64.0 %	n/m
Prior years		(2.1)	—
Loss and LAE ratio		61.9	n/m
Commission expense ratio		14.2	n/m
Underwriting expense ratio		20.7	n/m
Combined ratio		96.8 %	n/m

n/m - not meaningful
(1) See Page 14 for a description of our reportable segments
(2) Losses and LAE in Corporate and Other represent the impact of the LPT Agreement

EMPLOYERS HOLDINGS, INC. Net Income Before Income Taxes by Segment ⁽¹⁾ (unaudited) $ in millions

		Employers			Cerity			Corporate and Other			Consolidated
Nine Months Ended September 30, 2021
Gross premiums written		$	446.7		$	1.0		$	—		$	447.7
Net premiums written			441.7			1.0			—			442.7

Net premiums earned	A		417.6			0.4			—			418.0
Net investment income			52.5			2.1			0.3			54.9
Net realized and unrealized gains (losses) on investments			29.7			0.2			(0.3	)		29.6
Other income			0.8			—			—			0.8
Total revenues			500.6			2.7			—			503.3

Losses and LAE incurred ⁽²⁾	B		(250.3	)		(0.3	)		6.1			(244.5	)
Commission expense	C		(54.7	)		—			—			(54.7	)
Underwriting and general and administrative expenses	D		(99.9	)		(9.6	)		(11.5	)		(121.0	)
Interest and financing expenses			—			—			(0.4	)		(0.4	)
Other expenses			(4.1	)		—			—			(4.1	)
Total expenses			(409.0	)		(9.9	)		(5.8	)		(424.7	)
Net income (loss) before income taxes		$	91.6		$	(7.2	)	$	(5.8	)	$	78.6

Underwriting income (loss)	A+B+C+D	$	12.7		$	(9.5	)

Loss and LAE expense ratio:
Current year			63.7	%		n/m
Prior years			(3.8	)		—
Loss and LAE ratio			59.9			n/m
Commission expense ratio			13.1			n/m
Underwriting expense ratio			23.9			n/m
Combined ratio			96.9	%		n/m

n/m - not meaningful
(1) See Page 14 for a description of our reportable segments
(2) Losses and LAE in Corporate and Other represent the impact of the LPT Agreement

EMPLOYERS HOLDINGS, INC. Return on Equity (unaudited) $ in millions

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2022			2021			2022			2021

Net income	A	$	19.1		$	15.0		$	1.3		$	64.5
Impact of the LPT Agreement			(2.1	)		(2.1	)		(6.3	)		(6.1	)
Net realized and unrealized (gains) losses on investments			(1.9	)		(2.7	)		65.5			(29.6	)
Severance costs and asset impairment charges			—			1.1			—			4.1
Income tax expense (benefit) related to items excluded from Net income			0.4			0.3			(13.8	)		5.4
Adjusted net income ⁽¹⁾	B		15.5			11.6			46.7			38.3

Stockholders' equity - end of period		$	919.0		$	1,189.9		$	919.0		$	1,189.9

Stockholders' equity - beginning of period			977.5			1,203.6			1,213.1			1,212.8

Average stockholders' equity	C		948.3			1,196.8			1,066.1			1,201.4

Stockholders' equity - end of period		$	919.0		$	1,189.9		$	919.0		$	1,189.9
Deferred Gain - end of period			108.1			119.2			108.1			119.2
Accumulated other comprehensive loss (income) - end of period			201.1			(99.3	)		201.1			(99.3	)
Income taxes related to accumulated other comprehensive (loss) income - end of period			(42.2	)		20.9			(42.2	)		20.9
Adjusted stockholders' equity - end of period			1,186.0			1,230.7			1,186.0			1,230.7
Adjusted stockholders' equity - beginning of period			1,182.4			1,237.1			1,266.9			1,223.1
Average adjusted stockholders' equity⁽¹⁾	D		1,184.2			1,233.9			1,226.5			1,226.9

Return on stockholders' equity	A / C		2.0	%		1.3	%		0.1	%		5.4	%
Annualized return on stockholders' equity			8.1			5.0			0.2			7.2

Adjusted return on stockholders' equity ⁽¹⁾	B / D		1.3	%		0.9	%		3.8	%		3.1	%
Annualized adjusted return on stockholders' equity ⁽¹⁾			5.2			3.8			5.1			4.2

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

EMPLOYERS HOLDINGS, INC. Roll-forward of Unpaid Losses and LAE (unaudited) $ in millions

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021

Unpaid losses and LAE at beginning of period	$	1,972.8		$	2,007.6		$	1,981.2		$	2,069.4
Reinsurance recoverable, excluding CECL allowance, on unpaid losses and LAE		462.4			483.5			476.9			497.0
Net unpaid losses and LAE at beginning of period		1,510.4			1,524.1			1,504.3			1,572.4
Losses and LAE incurred:
Current year losses		114.6			93.4			316.3			266.2
Prior year losses on voluntary business		—			—			(9.6	)		(15.0	)
Prior year losses on involuntary business		(0.3	)		(0.1	)		(0.7	)		(0.6	)
Total losses incurred		114.3			93.3			306.0			250.6
Losses and LAE paid:
Current year losses		27.3			22.1			50.4			42.6
Prior year losses		73.9			71.6			236.4			256.7
Total paid losses		101.2			93.7			286.8			299.3
Net unpaid losses and LAE at end of period		1,523.5			1,523.7			1,523.5			1,523.7
Reinsurance recoverable, excluding CECL allowance, on unpaid losses and LAE		456.4			478.4			456.4			478.4
Unpaid losses and LAE at end of period	$	1,979.9		$	2,002.1		$	1,979.9		$	2,002.1

Total losses and LAE shown in the above table exclude amortization of the Deferred Gain, which totaled $2.1 million for each of the three months ended September 30, 2022 and 2021 and $6.3 million and $6.1 million for the nine months ended September 30, 2022 and 2021, respectively.

EMPLOYERS HOLDINGS, INC. Consolidated Investment Portfolio (unaudited) $ in millions

	September 30, 2022									December 31, 2021
Investment Positions:	Cost or Amortized Cost ⁽¹⁾		Net Unrealized Gain (Loss)			Fair Value		%		Fair Value		%
Fixed maturity securities	$	2,440.9	$	(201.1	)	$	2,235.1	85	%	$	2,342.7	83	%
Equity securities		152.8		35.7			188.5	7			344.4	12
Short-term investments		—		—			—	—			10.5	—
Other invested assets		52.9		5.5			58.4	2			38.4	1
Cash and cash equivalents		148.1		—			148.1	6			75.1	3
Restricted cash and cash equivalents		0.2		—			0.2	—			0.2	—
Total investments and cash	$	2,794.9	$	(159.9	)	$	2,630.3	100	%	$	2,811.3	100	%

Breakout of Fixed Maturity Securities:
U.S. Treasuries and agencies	$	97.4	$	(4.6	)	$	92.8	4	%	$	68.1	3	%
States and municipalities		366.3		(11.1	)		355.1	16			436.1	19
Corporate securities		1,011.4		(108.0	)		901.7	40			1,080.3	46
Mortgage-backed securities		465.0		(54.0	)		411.0	18			414.1	18
Asset-backed securities		67.9		(8.4	)		59.5	3			68.5	3
Collateralized loan obligations		267.3		(7.7	)		259.6	12			85.4	4
Bank loans and other		165.6		(7.3	)		155.4	7			190.2	8
Total fixed maturity securities	$	2,440.9	$	(201.1	)	$	2,235.1	100	%	$	2,342.7	100	%

Weighted average book yield	3.6%	3.0%
Average credit quality (S&P)	A+	A+
Duration	4.0	3.4
(1) Amortized cost excludes allowance for current expected credit losses (CECL) of $4.7 million.

EMPLOYERS HOLDINGS, INC. Book Value Per Share (unaudited) $ in millions, except per share amounts

		September 30, 2022			June 30, 2022			December 31, 2021			September 30, 2021
Numerators:
Stockholders' equity	A	$	919.0		$	977.5		$	1,213.1		$	1,189.9
Plus: Deferred Gain			108.1			110.2			114.4			119.2
Stockholders' equity including the Deferred Gain⁽¹⁾	B		1,027.1			1,087.7			1,327.5			1,309.1
Accumulated other comprehensive loss (income)			201.1			119.8			(76.7	)		(99.3	)
Income taxes related to accumulated other comprehensive (loss) income			(42.2	)		(25.1	)		16.1			20.9
Adjusted stockholders' equity ⁽¹⁾	C	$	1,186.0		$	1,182.4		$	1,266.9		$	1,230.7

Denominator (shares outstanding)	D		27,196,333			27,383,132			27,741,400			27,964,380

Book value per share ⁽¹⁾	A / D	$	33.79		$	35.70		$	43.73		$	42.55
Book value per share including the Deferred Gain⁽¹⁾	B / D		37.77			39.72			47.85			46.81
Adjusted book value per share ⁽¹⁾	C / D		43.61			43.18			45.67			44.01

YTD Change in: ⁽²⁾
Book value per share			(18.7	) %								2.0	%
Book value per share including the Deferred Gain			(17.4	)								1.5
Adjusted book value per share			(0.6	)								4.5

(1) See Page 13 for information regarding our use of Non-GAAP Financial Measures.
(2) Reflects the change in book value per share after taking into account dividends declared of $1.77 and $0.75 for the nine months ended September 30, 2022 and 2021, respectively.

EMPLOYERS HOLDINGS, INC. Earnings Per Share (unaudited) $ in millions, except per share amounts

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2022			2021			2022			2021
Numerators:
Net income	A	$	19.1		$	15.0		$	1.3		$	64.5
Impact of the LPT Agreement			(2.1	)		(2.1	)		(6.3	)		(6.1	)
Net income (loss) before impact of the LPT ⁽¹⁾	B		17.0			12.9			(5.0	)		58.4
Net realized and unrealized (gains) losses on investments			(1.9	)		(2.7	)		65.5			(29.6	)
Severance costs and asset impairment charges			—			1.1			—			4.1
Income tax expense (benefit) related to items excluded from Net income			0.4			0.3			(13.8	)		5.4
Adjusted net income ⁽¹⁾	C	$	15.5		$	11.6		$	46.7		$	38.3

Denominators:
Average common shares outstanding (basic)	D		27,312,409			28,236,398			27,504,566			28,409,612
Average common shares outstanding (diluted)	E		27,436,428			28,455,062			27,681,666			28,743,221

Earnings per share:
Basic	A / D	$	0.70		$	0.53		$	0.05		$	2.27
Diluted⁽²⁾	A / E		0.70			0.53			0.05			2.24

Earnings (loss) per share before impact of the LPT: ⁽¹⁾
Basic	B / D	$	0.62		$	0.46		$	(0.18	)	$	2.06
Diluted	B / E		0.62			0.45			(0.18	)		2.03

Adjusted earnings per share: ⁽¹⁾
Basic	C / D	$	0.57		$	0.41		$	1.70		$	1.35
Diluted	C / E		0.56			0.41			1.69			1.33

(1) See Page 13 for information regarding our use of Non-GAAP Financial Measures.
(2) Represents basic loss per share or diluted earnings per share, as appropriate.

Non-GAAP Financial Measures

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

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

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

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

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

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

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

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

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

Description of Reportable Segments

The Company has determined that it has two reportable segments: Employers and Cerity. Each of these segments represents a separate and distinct distribution channel through which the Company conducts insurance business.

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

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20221027006087/en/

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