Employers Holdings, Inc. (“EHI” or the “Company”) (NYSE:EIG) today reported third quarter 2012 net income of $8.2 million or $0.26 per diluted share. Net income in the third quarter of 2011 was $11.8 million or $0.31 per diluted share. As expected, during the third quarter of 2012, we recorded a $1.3 million or $0.01 per diluted share addition to underwriting and other operating expense as a result of our prospective adoption of the Financial Accounting Standards Board's change in accounting standards for deferred acquisition costs ("DAC"). This change in accounting method, which became effective in 2012, alters the definition of acquisition costs which may be capitalized and lowered our reported net income as a result of having to expense certain costs that were capitalized in prior years. Adjusted for the change in DAC accounting, non-GAAP net income was $8.4 million or $0.27 per diluted share, a decrease of $0.04 per share compared with last year's third quarter. We continue to estimate that as a result of the new DAC accounting, our underwriting and other operating expenses will increase in the fourth quarter by less than $1 million (or 6% of the total $7 million increase in underwriting and other operating expenses in 2012). The year-to-date increase in these expenses was $6.5 million at the end of the third quarter.
Net income includes amortization of the deferred reinsurance gain related to the Loss Portfolio Transfer (“LPT”) Agreement. Consolidated net income before the impact of the LPT deferred reinsurance gain (the Company's non-GAAP measure described below) was $4.5 million or $0.14 per diluted share in the third quarter of 2012 and $7.6 million or $0.20 per diluted share in the third quarter of 2011. Adjusted for the change in DAC accounting, net income before the impact of the LPT deferred reinsurance gain was $4.8 million or $0.15 per diluted share in the third quarter of 2012, which was $2.8 million or $0.05 per diluted share lower than the third quarter of 2011.
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