Employers Holdings, Inc. (“EHI” or the “Company”) (NYSE:EIG) today reported second quarter 2013 net income of $14.6 million or $0.46 per diluted share. Net income in the second quarter of 2012 was $5.0 million or $0.16 per diluted share.
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 $9.9 million or $0.31 per diluted share in the second quarter of 2013 and $0.7 million or $0.02 per diluted share in the second quarter of 2012.
The second quarter 2013 combined ratio was 103.2% and 106.1% before the impact of the LPT deferred reinsurance gain, compared with 113.3% and 116.9% before the impact of the LPT deferred reinsurance gain for the second quarter of 2012. Year over year, the combined ratio improved 10.1 percentage points on a GAAP basis and 10.8 percentage points before the impact of the LPT.
Adjusted for the LPT, book value per share was $25.68 at the end of the second quarter compared with $26.66 at year-end 2012, a decline of $0.98. Rising interest rates in the second quarter of 2013 resulted in decreased unrealized gains on fixed maturity investments reducing stockholders' equity. Approximately $0.79 of the decline in adjusted book value per share was attributable to reduced stockholders' equity and the remaining $0.19 of the change was attributable to an increase in shares outstanding as the result of routine exercises of employee equity awards. Under the Company’s long-term incentive compensation plan, the first options granted are due to expire in 2014. The Company expects officers to be exercising these options prior to their expiration in August of 2014.
President and Chief Executive Officer Douglas D. Dirks commented on the results: “We are pleased with the substantial improvements in financial and operating performance that we achieved in the second quarter of this year relative to last year. Net income before the LPT increased nearly $10 million or $0.29 per diluted share. Our underwriting, commission and loss expenses as a percentage of earned premium all improved relative to the second quarter of 2012, driving a significant improvement of nearly eleven points in our combined ratio before the LPT."