Employers Holdings, Inc. Reports Second Quarter 2021 Results; Declares Third Quarter 2021 Cash Dividend of $0.25 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 in low-to-medium hazard industries, today reported financial results for its second quarter ended June 30, 2021.

Financial Highlights

• Record number of ending policies in-force (107,314), up 3.7% since year-end;
• Gross premiums written were $147.1 million, an increase of 5%;
• Net income of $26.4 million, or $0.92 per diluted share;
• Adjusted net income of $11.8 million, or $0.41 per diluted share;
• Net pretax realized and unrealized gains on investments recorded through the income statement of $16.0 million;
• Net investment income of $18.2 million, down 9% year-over-year;
• Net premiums earned of $137.0 million, down 10% year-over-year;
• Net favorable prior year loss reserve development on voluntary business of $1.6 million, vs. $23.5 million a year ago;
• The Company repurchased 250,336 shares of its common stock at an average price of $41.72 per share;
• Book value per share including the Deferred Gain of $46.83, up 2.3% for the quarter including dividends declared.

Management Commentary

Chief Executive Officer Katherine Antonello commented: “With businesses reopening and restrictions lifted, we have begun to capture year-over-year increases in new business submissions, quotes and binds and are encouraged by the rebound we experienced during the second quarter of 2021. We closed the quarter with another record number of policies in-force and premium in-force has begun to increase, which demonstrates that our policyholders have endured the pandemic and small businesses are actively shopping for workers' compensation coverage. Our year-over-year new business premium is down slightly, however, as both the labor-force participation rate and unemployment rate continue to improve, we remain confident that rising payrolls and new business opportunities will bring further growth to our top line.

During the second quarter, we delivered a 3.8% annualized return on adjusted equity and a combined ratio of 98.8% within our largest operating segment, Employers. While we continued to experience significant favorable loss reserve development in nearly all prior accident years, our second quarter results were tempered by $8 million of adverse loss reserve development associated with two catastrophic non-COVID claims that occurred in late 2020.

Last quarter we referred to our $46.6 million of underwriting and general and administrative expenses as the high-water mark for 2021 and, as expected, those expenses decreased by 21% during the second quarter. The decrease was primarily a result of targeted expense savings, employee departures and lower variable expenses that fluctuate directly with earned premium.”

Ms. Antonello continued, "Our Cerity operating segment, which offers digital workers' compensation insurance solutions directly to consumers, continues to gather momentum and now has $1 million of in-force premium, all within our targeted low hazard groups A through D. While the low-to-medium hazard direct to consumer workers' compensation market is relatively immature and Cerity is an early entrant in this space, we believe that its technological and intellectual capabilities will support our future growth initiatives and provide direct access to workers' compensation insurance for businesses seeking an online experience.

In summary, we are diligently focused on capitalizing on emerging labor market improvements, while continuing to maintain underwriting discipline and actively managing our expenses. Our balance sheet and capital position are very strong and are highly supportive of these key initiatives."

Summary of Second Quarter 2021 Results

(All comparisons vs. second quarter 2020, unless noted otherwise).

Gross premiums written were $147.1 million, an increase of 5%. The increase was primarily due to an increase in new policies written and average policy size. Net premiums earned were $137.0 million, a decrease of 10% year-over-year.

Losses and loss adjustment expenses were $83.7 million, an increase of 15%. The Company recognized $1.6 million of net favorable prior year loss reserve development on voluntary business during the current period, versus $23.5 million a year ago. The increase in losses and loss adjustment expenses was primarily due to $8.0 million of unfavorable development in accident year 2020 resulting from two catastrophic non-COVID claims, which was offset by favorable development of $9.6 million primarily in accident years 2017 and prior.

Commission expenses were $18.0 million, a decrease of 6%. The decrease was primarily due to the decrease in earned premiums.

Underwriting and general and administrative expenses were $37.0 million, a decrease of 17%. The decrease resulted from targeted expense savings and employee reductions and departures, which reduced our fixed expenses such as compensation and professional fees, as well as reductions in variable expenses, such as premium taxes and assessments and bad debt expenses, resulting from the decrease in earned premium.

Net investment income was $18.2 million, a decrease of 9%. The decrease was primarily due to lower interest rates year-over-year impacting bond yields.

Income tax expense was $6.0 million (19% effective rate) versus $14.7 million (20% effective rate). The effective rates during each of the periods presented included income tax benefits associated with tax-advantaged investment income, LPT adjustments, and deferred gain amortization.

The Company’s book value per share of $42.54 and book value per share including the Deferred Gain of $46.83 increased by 2.7% and 2.3% during the second quarter of 2021, respectively, computed after taking into account dividends declared. These measures were impacted during the current period by $10.4 million of after-tax unrealized gains arising from fixed maturity securities (which are reflected on the balance sheet) and $11.1 million of net after tax unrealized gains 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. second quarter 2020, unless noted otherwise).

Employers Segment

The Employers segment reported net income before income taxes of $35.0 million versus $75.5 million.

Highlights include the following:

– Underwriting income of $1.7 million versus $18.2 million;

– Combined ratio of 98.8% versus 88.0%;

– Current accident year loss and LAE ratio of 63.7% versus 65.5%;

– Net favorable prior year loss reserve development of 1.1 percentage points versus 15.6 percentage points;

– Commission expense ratio of 13.2% versus 12.7%;

– Underwriting expense ratio of 23.0% versus 25.4%;

– Net investment income of $17.4 million versus $18.8 million; and

– Net realized and unrealized gains on investments recorded through the income statement of $15.8 million versus $38.2 million.

Cerity Segment

The Cerity segment reported a net loss before income taxes of $1.6 million versus $2.0 million, and an underwriting loss of $2.5 million versus $4.2 million.

Highlights include the following:

– Written premium of $0.3 million versus less than $0.1 million;

– Net investment income of $0.7 million versus $0.9 million;

– Net realized and unrealized gains on investments recorded through the income statement of $0.2 million versus $1.3 million; and

– Underwriting expenses of $2.6 million versus $4.3 million.

Corporate and Other

Corporate and Other activities reported net income (loss) before income taxes of $(1.0) million versus $0.8 million.

Highlights include the following:

– LPT amortization, which served to reduce losses and LAE, of $2.0 million versus $2.5 million;

– Net investment income of $0.1 million versus $0.2 million;

– Net realized and unrealized gains on investments recorded through the income statement of zero versus $0.2 million; and

– General and administrative expenses of $2.9 million versus $2.1 million.

Share Repurchases and Third Quarter 2021 Dividend Declaration

During the second quarter of 2021, the Company repurchased 250,336 shares of its common stock at an average price of $41.72 per share.

On July 21, 2021, the Board of Directors authorized a new share repurchase program to allow for repurchases of up to $50.0 million of our common stock from July 27, 2021 through December 31, 2022. The new program replaces a similar program, which expired on June 30, 2021.

On July 21, 2021, the Board of Directors declared a third quarter 2021 dividend of $0.25 per share. The dividend is payable on August 18, 2021 to stockholders of record as of August 4, 2021.

Earnings Conference Call and Webcast

The Company will host a conference call on Friday, July 23, 2021, at 11:00 a.m. Eastern Daylight Time / 8:00 a.m. Pacific Daylight Time.

To participate in the live conference call by telephone, dial +1 (888) 364-8443 or +1 (484) 747-6630 and use the conference call access code 1379736.

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 remain on the Company’s web site for up to seven days following the live call. To listen to a recording of the call by telephone, dial +1 (855) 859-2056 or +1 (404) 537-3406 and use the conference call access code 1379736.

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, including the effects of the Coronavirus (COVID-19) pandemic, 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 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 and www.cerity.com for coverage availability.

Employers Holdings, Inc.
Second Quarter 2021
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 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											Six Months Ended
		June 30,											June 30,
		2021				2020				% change			2021				2020				% change
Selected financial highlights:
Gross premiums written		$	147.1			$	140.2			5	%		$	295.4			$	324.9			(9	)%
Net premiums written		146.0				139.0				5			292.9				322.4				(9	)
Net premiums earned		137.0				151.5				(10	)		270.9				319.4				(15	)
Net investment income		18.2				19.9				(9	)		36.6				39.8				(8	)
Net income before impact of the LPT(1)		24.4				57.1				(57	)		45.4				19.8				129
Adjusted net income(1)		11.8				25.7				(54	)		26.5				36.7				(28	)
Net income before income taxes		32.4				74.3				(56	)		60.0				29.0				107
Net income		26.4				59.6				(56	)		49.5				24.7				100
Comprehensive income		35.2				123.0				(71	)		22.2				64.4				(66	)
Total assets													3,836.7				4,004.0				(4	)
Stockholders' equity													1,203.6				1,144.0				5
Stockholders' equity including the Deferred Gain(2)													1,324.9				1,276.2				4
Adjusted stockholders' equity(2)													1,237.1				1,171.2				6
Annualized adjusted return on stockholders' equity(3)		3.8		%		8.9		%		(57	)%		4.3		%		6.1		%		(30	)%
Amounts per share:
Cash dividends declared per share		$	0.25			$	0.25			—	%		$	0.50			$	0.50			—	%
Earnings per diluted share(4)		0.92				1.97				(53	)		1.71				0.80				114	%
Earnings per diluted share before impact of the LPT(4)		0.85				1.89				(55	)		1.57				0.62				153	%
Adjusted earnings per diluted share(4)		0.41				0.85				(52	)		0.92				1.18				(22	)
Book value per share(2)													42.54				38.93				9
Book value per share including the Deferred Gain(2)													46.83				43.43				8
Adjusted book value per share(2)													43.73				39.86				10
Financial information by Segment(5):
Net income (loss) before income taxes
Employers		$	35.0			$	75.5			(54	)%		$	69.1			$	37.8			83
Cerity		(1.6		)		(2.0		)		20			(4.6		)		(6.7		)		31
Corporate and Other		(1.0		)		0.8				(225	)		(4.5		)		(2.1		)		(114	)
(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.
1

EMPLOYERS HOLDINGS, INC. Summary Consolidated Balance Sheets (unaudited) $ in millions, except per share amounts
		June 30, 2021				December 31, 2020
ASSETS
Investments, cash and cash equivalents		$	2,835.9			$	2,917.8
Accrued investment income		15.5				15.3
Premiums receivable, net		251.3				232.1
Reinsurance recoverable, net of allowance, on paid and unpaid losses and LAE		489.8				504.2
Deferred policy acquisition costs		45.9				43.2
Contingent commission receivable—LPT Agreement		13.4				13.4
Other assets		184.9				196.6
Total assets		$	3,836.7			$	3,922.6
LIABILITIES
Unpaid losses and LAE		$	2,007.6			$	2,069.4
Unearned premiums		315.7				299.1
Commissions and premium taxes payable		39.2				43.0
Deferred Gain		121.3				125.4
FHLB Advances(1)		—				20.0
Deferred income tax liability		9.7				15.5
Other liabilities		139.6				137.4
Total liabilities		$	2,633.1			$	2,709.8
STOCKHOLDERS' EQUITY
Common stock and additional paid-in capital		$	408.0			$	404.9
Retained earnings		1,283.0				1,247.9
Accumulated other comprehensive income, net		87.8				115.1
Treasury stock, at cost		(575.2		)		(555.1		)
Total stockholders’ equity		1,203.6				1,212.8
Total liabilities and stockholders’ equity		$	3,836.7			$	3,922.6
Stockholders' equity including the Deferred Gain (2)		$	1,324.9			$	1,338.2
Adjusted stockholders' equity (2)		1,237.1				1,223.1
Book value per share (2)		$	42.54			$	42.46
Book value per share including the Deferred Gain(2)		46.83				46.85
Adjusted book value per share (2)		43.73				42.82
(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.
2

EMPLOYERS HOLDINGS, INC. Summary Consolidated Income Statements (unaudited) $ in millions
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2021				2020				2021				2020
Revenues:
Net premiums earned		$	137.0			$	151.5			$	270.9			$	319.4
Net investment income		18.2				19.9				36.6				39.8
Net realized and unrealized gains (losses) on investments(1)		16.0				39.7				26.9				(21.4		)
Other income		0.2				0.3				0.6				0.6
Total revenues		171.4				211.4				335.0				338.4
Expenses:
Losses and LAE incurred		(83.7		)		(73.1		)		(153.3		)		(177.4		)
Commission expense		(18.0		)		(19.2		)		(34.8		)		(40.5		)
Underwriting and general and administrative expenses		(37.0		)		(44.8		)		(83.6		)		(91.5		)
Interest and financing expenses		(0.2		)		—				(0.3		)		—
Other expenses		(0.1		)		—				(3.0		)		—
Total expenses		(139.0		)		(137.1		)		(275.0		)		(309.4		)
Net income before income taxes		32.4				74.3				60.0				29.0
Income tax expense		(6.0		)		(14.7		)		(10.5		)		(4.3		)
Net income		26.4				59.6				49.5				24.7
Unrealized AFS investment gains (losses) arising during the period, net of tax(2)		10.4				69.3				(25.1		)		40.2
Reclassification adjustment for net realized AFS investment gains in net income, net of tax(2)		(1.6		)		(5.9		)		(2.2		)		(0.5		)
Total comprehensive income		$	35.2			$	123.0			$	22.2			$	64.4
Net income		$	26.4			$	59.6			$	49.5			$	24.7
Amortization of the Deferred Gain - losses		(1.6		)		(2.1		)		(3.3		)		(4.1		)
Amortization of the Deferred Gain - contingent commission		(0.4		)		(0.4		)		(0.8		)		(0.8		)
Net income before impact of the LPT Agreement (3)		24.4				57.1				45.4				19.8
Net realized and unrealized (gains) losses on investments		(16.0		)		(39.7		)		(26.9		)		21.4
Severance costs		0.1				—				3.0				—
Income tax expense (benefit) related to items excluded from Net income or loss		3.3				8.3				5.0				(4.5		)
Adjusted net income		$	11.8			$	25.7			$	26.5			$	36.7
(1) Includes unrealized gains (losses) on equity securities and other investments of $(1.9) million and $42.0 million for the three months ended June 30, 2021 and 2020, respectively, and $7.6 million and $(27.6) million for the six months ended June 30, 2021 and 2020, respectively.
(2) AFS = Available for Sale securities.
(3) See Page 13 regarding our use of Non-GAAP Financial Measures.
3

EMPLOYERS HOLDINGS, INC. Net Income Before Income Taxes by Segment (1) (unaudited) $ in millions
				Employers				Cerity				Corporate and Other				Consolidated
Three Months Ended June 30, 2021
Gross premiums written				$	146.8			$	0.3			$	—			$	147.1
Net premiums written				145.7				0.3				—				146.0
Net premiums earned		A		136.8				0.2				—				137.0
Net investment income				17.4				0.7				0.1				18.2
Net realized and unrealized gains on investments				15.8				0.2				—				16.0
Other income				0.2				—				—				0.2
Total revenues				170.2				1.1				0.1				171.4
Losses and LAE incurred (2)		B		(85.6		)		(0.1		)		2.0				(83.7		)
Commission expense		C		(18.0		)		—				—				(18.0		)
Underwriting and general and administrative expenses		D		(31.5		)		(2.6		)		(2.9		)		(37.0		)
Interest and financing expenses				—				—				(0.2		)		(0.2		)
Other expenses				(0.1		)		—				—				(0.1		)
Total expenses				(135.2		)		(2.7		)		(1.1		)		(139.0		)
Net income (loss) before income taxes				$	35.0			$	(1.6	)		$	(1.0	)		$	32.4
Underwriting income (loss)		A+B+C+D		1.7				(2.5		)
Loss and LAE expense ratio:
Current year				63.7		%		n/m
Prior years				(1.1		)		—
Loss and LAE ratio				62.6				n/m
Commission expense ratio				13.2				n/m
Underwriting expense ratio				23.0				n/m
Combined ratio				98.8		%		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
4

EMPLOYERS HOLDINGS, INC. Net Income Before Income Taxes by Segment (1) (unaudited) $ in millions
				Employers				Cerity				Corporate and Other				Consolidated
Three Months Ended June 30, 2020
Gross premiums written				$	140.2			$	—			$	—			$	140.2
Net premiums written				139.0				—				—				139.0
Net premiums earned		A		151.4				0.1				—				151.5
Net investment income				18.8				0.9				0.2				19.9
Net realized and unrealized gains on investments				38.2				1.3				0.2				39.7
Other income				0.3				—				—				0.3
Total revenues				208.7				2.3				0.4				211.4
Losses and LAE incurred (2)		B		(75.6		)		—				2.5				(73.1		)
Commission expense		C		(19.2		)		—				—				(19.2		)
Underwriting and general and administrative expenses		D		(38.4		)		(4.3		)		(2.1		)		(44.8		)
Total expenses				(133.2		)		(4.3		)		0.4				(137.1		)
Net income (loss) before income taxes				$	75.5			$	(2.0	)		$	0.8			$	74.3
Underwriting income (loss)		A+B+C+D		$	18.2			$	(4.2	)
Loss and LAE expense ratio:
Current year				65.5		%		n/m
Prior years				(15.6		)		—
Loss and LAE ratio				49.9				n/m
Commission expense ratio				12.7				n/m
Underwriting expense ratio				25.4				n/m
Combined ratio				88.0		%		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
5

EMPLOYERS HOLDINGS, INC. Net Income Before Income Taxes by Segment (1) (unaudited) $ in millions
				Employers				Cerity				Corporate and Other				Consolidated
Six Months Ended June 30, 2021
Gross premiums written				$	294.8			$	0.6			$	—			$	295.4
Net premiums written				292.3				0.6				—				292.9
Net premiums earned		A		270.7				0.2				—				270.9
Net investment income				35.1				1.4				0.1				36.6
Net realized and unrealized gains on investments				26.6				0.3				—				26.9
Other income				0.6				—				—				0.6
Total revenues				333.0				1.9				0.1				335.0
Losses and LAE incurred (2)		B		(157.3		)		(0.1		)		4.1				(153.3		)
Commission expense		C		(34.8		)		—				—				(34.8		)
Underwriting and general and administrative expenses		D		(68.8		)		(6.4		)		(8.4		)		(83.6		)
Interest and financing expenses				—				—				(0.3		)		(0.3		)
Other expenses				(3.0		)		—				—				(3.0		)
Total expenses				(263.9		)		(6.5		)		(4.6		)		(275.0		)
Net income (loss) before income taxes				$	69.1			$	(4.6	)		$	(4.5	)		$	60.0
Underwriting income (loss)		A+B+C+D		9.8				(6.3		)
Loss and LAE expense ratio:
Current year				63.8		%		n/m
Prior years				(5.7		)		—
Loss and LAE ratio				58.1				n/m
Commission expense ratio				12.9				n/m
Underwriting expense ratio				25.4				n/m
Combined ratio				96.4		%		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
6

EMPLOYERS HOLDINGS, INC. Net Income Before Income Taxes by Segment (1) (unaudited) $ in millions
				Employers				Cerity				Corporate and Other				Consolidated
Six Months Ended June 30, 2020
Gross premiums written				$	324.9			$	—			$	—			$	324.9
Net premiums written				322.4				—				—				322.4
Net premiums earned		A		319.3				0.1				—				319.4
Net investment income				37.4				1.7				0.7				39.8
Net realized and unrealized (losses) on investments				(19.1		)		(0.4		)		(1.9		)		(21.4		)
Other income				0.6				—				—				0.6
Total revenues				338.2				1.4				(1.2		)		338.4
Losses and LAE incurred (2)		B		(182.3		)		—				4.9				(177.4		)
Commission expense		C		(40.5		)		—				—				(40.5		)
Underwriting and general and administrative expenses		D		(77.6		)		(8.1		)		(5.8		)		(91.5		)
Total expenses				(300.4		)		(8.1		)		(0.9		)		(309.4		)
Net income (loss) before income taxes				$	37.8			$	(6.7	)		$	(2.1	)		$	29.0
Underwriting income (loss)		A+B+C+D		$	18.9			$	(8.0	)
Loss and LAE expense ratio:
Current year				65.6		%		n/m
Prior years				(8.5		)		—
Loss and LAE ratio				57.1				n/m
Commission expense ratio				12.7				n/m
Underwriting expense ratio				24.3				n/m
Combined ratio				94.1		%		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
7

EMPLOYERS HOLDINGS, INC. Return on Equity (unaudited) $ in millions
				Three Months Ended								Six Months Ended
				June 30,								June 30,
				2021				2020				2021				2020
Net income		A		$	26.4			$	59.6			$	49.5			$	24.7
Impact of the LPT Agreement				(2.0		)		(2.5		)		(4.1		)		(4.9		)
Net realized and unrealized (gains) losses on investments				(16.0		)		(39.7		)		(26.9		)		21.4
Severance costs				0.1				—				3.0				—
Income tax expense (benefit) related to items excluded from Net income				3.3				8.3				5.0				(4.5		)
Adjusted net income (1)		B		11.8				25.7				26.5				36.7
Stockholders' equity - end of period				$	1,203.6			$	1,144.0			$	1,203.6			$	1,144.0
Stockholders' equity - beginning of period				1,186.6				1,057.3				1,212.8				1,165.8
Average stockholders' equity		C		1,195.1				1,100.7				1,208.2				1,154.9
Stockholders' equity - end of period				$	1,203.6			$	1,144.0			$	1,203.6			$	1,144.0
Deferred Gain - end of period				121.3				132.2				121.3				132.2
Accumulated other comprehensive income - end of period				(111.1		)		(132.9		)		(111.1		)		(132.9		)
Income taxes related to accumulated other comprehensive income - end of period				23.3				27.9				23.3				27.9
Adjusted stockholders' equity - end of period				1,237.1				1,171.2				1,237.1				1,171.2
Adjusted stockholders' equity - beginning of period				1,230.9				1,150.4				1,223.1				1,237.6
Average adjusted stockholders' equity (1)		D		1,234.0				1,160.8				1,230.1				1,204.4
Return on stockholders' equity		A / C		2.2		%		5.4		%		4.1		%		2.1		%
Annualized return on stockholders' equity				8.8				21.7				8.2				4.3
Adjusted return on stockholders' equity (1)		B / D		1.0		%		2.2		%		2.2		%		3.0		%
Annualized adjusted return on stockholders' equity (1)				3.8				8.9				4.3				6.1
(1) See Page 13 for information regarding our use of Non-GAAP Financial Measures.
8

EMPLOYERS HOLDINGS, INC. Roll-forward of Unpaid Losses and LAE (unaudited) $ in millions
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2021				2020				2021				2020
Unpaid losses and LAE at beginning of period		$	2,034.1			$	2,191.7			$	2,069.4			$	2,192.8
Reinsurance recoverable, excluding CECL allowance, on unpaid losses and LAE		492.3				527.0				497.0				532.5
Net unpaid losses and LAE at beginning of period		1,541.8				1,664.7				1,572.4				1,660.3
Losses and LAE incurred:
Current year losses		87.3				99.2				172.9				209.4
Prior year losses on voluntary business		(1.6		)		(23.5		)		(15.0		)		(26.5		)
Prior year losses on involuntary business		—				(0.1		)		(0.5		)		(0.6		)
Total losses incurred		85.7				75.6				157.4				182.3
Losses and LAE paid:
Current year losses		15.9				17.1				20.6				24.0
Prior year losses		87.5				76.1				185.1				171.5
Total paid losses		103.4				93.2				205.7				195.5
Net unpaid losses and LAE at end of period		1,524.1				1,647.1				1,524.1				1,647.1
Reinsurance recoverable, excluding CECL allowance, on unpaid losses and LAE		483.5				523.6				483.5				523.6
Unpaid losses and LAE at end of period		$	2,007.6			$	2,170.7			$	2,007.6			$	2,170.7
Total losses and LAE shown in the above table exclude amortization of the Deferred Gain, which totaled $2.0 million and $2.5 million for the three months ended June 30, 2021 and 2020, respectively, and $4.1 million and $4.9 million for the six months ended June 30, 2021 and 2020, respectively.
9

EMPLOYERS HOLDINGS, INC. Consolidated Investment Portfolio (unaudited) $ in millions
		June 30, 2021																	December 31, 2020
Investment Positions:		Cost or Amortized Cost				Net Unrealized Gain				Fair Value						%			Fair Value				%
Fixed maturity securities		$	2,307.2			$	111.1			$	2,418.3					85	%		$	2,479.2			85	%
Equity securities		160.6				103.1				263.7						9			215.2				7
Short-term investments		0.3				—				0.3						—			26.6				1
Other invested assets		45.8				—				45.8						2			36.2				1
Cash and cash equivalents		107.6				—				107.6						4			160.4				5
Restricted cash and cash equivalents		0.2				—				0.2						—			0.2				—
Total investments and cash		$	2,621.7			$	214.2			$	2,835.9					100	%		$	2,917.8			100	%
Breakout of Fixed Maturity Securities:
U.S. Treasuries and agencies		$	69.9			$	2.6			$	72.5					3	%		$	81.4			3	%
States and municipalities		399.6				27.7				427.3						18			482.7				19
Corporate securities		1,053.9				65.8				1,119.7						46			1,046.4				42
Mortgage-backed securities		463.6				13.5				477.1						20			563.4				23
Asset-backed securities		47.3				0.7				48.0						2			42.6				2
Collateralized loan obligations		85.4				—				85.4						4			83.6				3
Bank loans and other		187.5				0.8				188.3						8			179.1				7
Total fixed maturity securities		$	2,307.2			$	111.1			$	2,418.3					100	%		$	2,479.2			100	%
Weighted average book yield										3.1%									3.0%
Average credit quality (S&P)										A+									A+
Duration										3.7									3.2
10

EMPLOYERS HOLDINGS, INC. Book Value Per Share (unaudited) $ in millions, except per share amounts
				June 30, 2021				March 31, 2021				December 31, 2020				June 30, 2020
Numerators:
Stockholders' equity		A		$	1,203.6			$	1,186.6			$	1,212.8			$	1,144.0
Plus: Deferred Gain				121.3				123.3				125.4				132.2
Stockholders' equity including the Deferred Gain (1)		B		1,324.9				1,309.9				1,338.2				1,276.2
Accumulated other comprehensive income				(111.1		)		(100.0		)		(145.7		)		(132.9		)
Income taxes related to accumulated other comprehensive income				23.3				21.0				30.6				27.9
Adjusted stockholders' equity (1)		C		$	1,237.1			$	1,230.9			$	1,223.1			$	1,171.2
Denominator (shares outstanding)		D		28,291,782				28,478,254				28,564,798				29,382,894
Book value per share (1)		A / D		$	42.54			$	41.67			$	42.46			$	38.93
Book value per share including the Deferred Gain(1)		B / D		46.83				46.00				46.85				43.43
Adjusted book value per share (1)		C / D		43.73				43.22				42.82				39.86
YTD Change in: (2)
Book value per share				1.4		%										6.1		%
Book value per share including the Deferred Gain				1.0												5.7
Adjusted book value per share				3.3												2.3
(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 $0.50 for each of the six months ended June 30, 2021 and 2020.
11

EMPLOYERS HOLDINGS, INC. Earnings Per Share (unaudited) $ in millions, except per share amounts
				Three Months Ended								Six Months Ended
				June 30,								June 30,
				2021				2020				2021				2020
Numerators:
Net income		A		$	26.4			$	59.6			$	49.5			$	24.7
Impact of the LPT Agreement				(2.0		)		(2.5		)		(4.1		)		(4.9		)
Net income before impact of the LPT (1)		B		24.4				57.1				45.4				19.8
Net realized and unrealized (gains) losses on investments				(16.0		)		(39.7		)		(26.9		)		21.4
Severance costs				0.1				—				3.0				—
Income tax expense (benefit) related to items excluded from Net income				3.3				8.3				5.0				(4.5		)
Adjusted net income (1)		C		$	11.8			$	25.7			$	26.5			$	36.7
Denominators:
Average common shares outstanding (basic)		D		28,478,788				30,043,900				28,497,654				30,697,975
Average common shares outstanding (diluted)		E		28,809,341				30,229,553				28,888,735				31,020,128
Earnings per share:
Basic		A / D		$	0.93			$	1.98			$	1.74			$	0.80
Diluted (2)		A / E		0.92				1.97				1.71				0.80
Earnings per share before impact of the LPT: (1)
Basic		B / D		$	0.86			$	1.90			$	1.59			$	0.64
Diluted		B / E		0.85				1.89				1.57				0.62
Adjusted earnings per share: (1)
Basic		C / D		$	0.41			$	0.86			$	0.93			$	1.20
Diluted		C / E		0.41				0.85				0.92				1.18
(1) See Page 13 for information regarding our use of Non-GAAP Financial Measures.
12

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.

13

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 underwriting platform 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.

14

 

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