Nevada (State or other jurisdiction of incorporation or organization) | 04-3850065 (I.R.S. Employer Identification Number) | |
10375 Professional Circle, Reno, Nevada 89521 (Address of principal executive offices and zip code) |
Large accelerated filer R | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Emerging growth company o |
Class | July 19, 2018 | |
Common Stock, $0.01 par value per share | 32,759,375 shares outstanding |
Page No. | ||
Employers Holdings, Inc. and Subsidiaries | ||||||||
Consolidated Balance Sheets | ||||||||
(in millions, except share data) | ||||||||
As of | As of | |||||||
June 30, 2018 | December 31, 2017 | |||||||
Assets | (unaudited) | |||||||
Investments: | ||||||||
Fixed maturity securities at fair value (amortized cost $2,418.0 at June 30, 2018 and $2,421.0 at December 31, 2017) | $ | 2,401.2 | $ | 2,463.4 | ||||
Equity securities at fair value (cost $113.5 at June 30, 2018 and $116.7 at December 31, 2017) | 197.7 | 210.3 | ||||||
Equity securities at cost | 6.4 | — | ||||||
Short-term investments at fair value (amortized cost $4.0 at December 31, 2017) | — | 4.0 | ||||||
Total investments | 2,605.3 | 2,677.7 | ||||||
Cash and cash equivalents | 146.3 | 73.3 | ||||||
Restricted cash and cash equivalents | 1.0 | 1.0 | ||||||
Accrued investment income | 18.6 | 19.6 | ||||||
Premiums receivable (less bad debt allowance of $7.5 at June 30, 2018 and $10.0 at December 31, 2017) | 355.6 | 326.7 | ||||||
Reinsurance recoverable for: | ||||||||
Paid losses | 7.6 | 7.2 | ||||||
Unpaid losses | 512.5 | 537.0 | ||||||
Deferred policy acquisition costs | 51.7 | 45.8 | ||||||
Deferred income taxes, net | 24.4 | 28.7 | ||||||
Property and equipment, net | 20.3 | 13.9 | ||||||
Intangible assets, net | 7.8 | 7.9 | ||||||
Goodwill | 36.2 | 36.2 | ||||||
Contingent commission receivable—LPT Agreement | 32.0 | 31.4 | ||||||
Other assets | 49.2 | 33.7 | ||||||
Total assets | $ | 3,868.5 | $ | 3,840.1 | ||||
Liabilities and stockholders’ equity | ||||||||
Claims and policy liabilities: | ||||||||
Unpaid losses and loss adjustment expenses | $ | 2,227.9 | $ | 2,266.1 | ||||
Unearned premiums | 360.2 | 318.3 | ||||||
Total claims and policy liabilities | 2,588.1 | 2,584.4 | ||||||
Commissions and premium taxes payable | 58.9 | 55.3 | ||||||
Accounts payable and accrued expenses | 23.4 | 23.7 | ||||||
Deferred reinsurance gain—LPT Agreement | 154.7 | 163.6 | ||||||
Notes payable | 20.0 | 20.0 | ||||||
Other liabilities | 66.9 | 45.4 | ||||||
Total liabilities | $ | 2,912.0 | $ | 2,892.4 | ||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.01 par value; 150,000,000 shares authorized; 56,866,727 and 56,695,174 shares issued and 32,759,575 and 32,597,819 shares outstanding at June 30, 2018 and December 31, 2017, respectively | $ | 0.6 | $ | 0.6 | ||||
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued | — | — | ||||||
Additional paid-in capital | 382.4 | 381.2 | ||||||
Retained earnings | 970.8 | 842.2 | ||||||
Accumulated other comprehensive (loss) income, net of tax | (13.3 | ) | 107.4 | |||||
Treasury stock, at cost (24,107,152 shares at June 30, 2018 and 24,097,355 shares at December 31, 2017) | (384.0 | ) | (383.7 | ) | ||||
Total stockholders’ equity | 956.5 | 947.7 | ||||||
Total liabilities and stockholders’ equity | $ | 3,868.5 | $ | 3,840.1 |
Employers Holdings, Inc. and Subsidiaries | ||||||||||||||||
Consolidated Statements of Comprehensive Income | ||||||||||||||||
(in millions, except per share data) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues | (unaudited) | (unaudited) | ||||||||||||||
Net premiums earned | $ | 178.0 | $ | 171.7 | $ | 354.6 | $ | 347.1 | ||||||||
Net investment income | 20.3 | 18.2 | 39.7 | 36.9 | ||||||||||||
Net realized and unrealized gains (losses) on investments | 5.7 | 1.1 | (2.4 | ) | 3.3 | |||||||||||
Gain on redemption of notes payable | — | 2.1 | — | 2.1 | ||||||||||||
Other income | 0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||
Total revenues | 204.1 | 193.2 | 392.0 | 389.5 | ||||||||||||
Expenses | ||||||||||||||||
Losses and loss adjustment expenses | 87.8 | 106.1 | 183.2 | 215.0 | ||||||||||||
Commission expense | 24.5 | 21.5 | 48.2 | 43.0 | ||||||||||||
Underwriting and other operating expenses | 40.1 | 32.6 | 79.2 | 68.6 | ||||||||||||
Interest and financing expenses | 0.4 | 0.4 | 0.7 | 0.8 | ||||||||||||
Total expenses | 152.8 | 160.6 | 311.3 | 327.4 | ||||||||||||
Net income before income taxes | 51.3 | 32.6 | 80.7 | 62.1 | ||||||||||||
Income tax expense | 8.8 | 7.8 | 12.6 | 14.1 | ||||||||||||
Net income | $ | 42.5 | $ | 24.8 | $ | 68.1 | $ | 48.0 | ||||||||
Comprehensive income | ||||||||||||||||
Unrealized AFS investment (losses) gains arising during the period (net of taxes of $(3.0) and $4.5 for the three months ended June 30, 2018 and 2017, respectively, and $(12.6) and $9.7 for the six months ended June 30, 2018 and 2017, respectively) | $ | (11.3 | ) | $ | 8.4 | $ | (47.1 | ) | $ | 17.9 | ||||||
Reclassification adjustment for realized AFS investment losses (gains) in net income (net of taxes of $(0.4) for the three months ended June 30, 2017, and $0.1 and $(1.2) for the six months ended June 30, 2018 and 2017, respectively) | — | (0.7 | ) | 0.4 | (2.1 | ) | ||||||||||
Other comprehensive (loss) income, net of tax | (11.3 | ) | 7.7 | (46.7 | ) | 15.8 | ||||||||||
Total comprehensive income | $ | 31.2 | $ | 32.5 | $ | 21.4 | $ | 63.8 | ||||||||
Net realized and unrealized gains (losses) on investments | ||||||||||||||||
Net realized and unrealized gains (losses) on investments before impairments | $ | 5.7 | $ | 1.1 | $ | (0.4 | ) | $ | 3.5 | |||||||
Other than temporary impairment recognized in earnings | — | — | (2.0 | ) | (0.2 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments | $ | 5.7 | $ | 1.1 | $ | (2.4 | ) | $ | 3.3 | |||||||
Earnings per common share (Note 12): | ||||||||||||||||
Basic | $ | 1.29 | $ | 0.76 | $ | 2.07 | $ | 1.48 | ||||||||
Diluted | $ | 1.28 | $ | 0.75 | $ | 2.05 | $ | 1.46 | ||||||||
Cash dividends declared per common share and eligible RSUs and PSUs | $ | 0.20 | $ | 0.15 | $ | 0.40 | $ | 0.30 |
Employers Holdings, Inc. and Subsidiaries | ||||||||||||||||||||||||||
Consolidated Statements of Stockholders' Equity | ||||||||||||||||||||||||||
For the Six Months Ended June 30, 2018 and 2017 | ||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income, Net | Treasury Stock at Cost | Total Stockholders' Equity | |||||||||||||||||||||
Shares Issued | Amount | |||||||||||||||||||||||||
(in millions, except share data) | ||||||||||||||||||||||||||
Balance, January 1, 2018 | 56,695,174 | $ | 0.6 | $ | 381.2 | $ | 842.2 | $ | 107.4 | $ | (383.7 | ) | $ | 947.7 | ||||||||||||
Stock-based obligations | — | — | 3.9 | — | — | — | 3.9 | |||||||||||||||||||
Stock options exercised | 13,800 | — | 0.2 | — | — | — | 0.2 | |||||||||||||||||||
Vesting of RSUs and PSUs, net of shares withheld to satisfy tax withholdings | 157,753 | — | (2.9 | ) | — | — | — | (2.9 | ) | |||||||||||||||||
Acquisition of common stock | — | — | — | — | — | (0.3 | ) | (0.3 | ) | |||||||||||||||||
Dividends declared | — | — | — | (13.3 | ) | — | — | (13.3 | ) | |||||||||||||||||
Net income for the period | — | — | 68.1 | — | — | 68.1 | ||||||||||||||||||||
Reclassification adjustment for adoption of ASU No. 2016-01 | — | — | — | 74.0 | (74.0 | ) | — | — | ||||||||||||||||||
Change in net unrealized losses on investments, net of taxes of $12.5 | — | — | — | (46.7 | ) | — | (46.7 | ) | ||||||||||||||||||
Balance, June 30, 2018 | 56,866,727 | $ | 0.6 | $ | 382.4 | $ | 970.8 | $ | (13.3 | ) | $ | (384.0 | ) | $ | 956.5 | |||||||||||
Balance, January 1, 2017 | 56,226,277 | $ | 0.6 | $ | 372.0 | $ | 777.2 | $ | 74.5 | $ | (383.7 | ) | $ | 840.6 | ||||||||||||
Stock-based obligations | — | — | 3.2 | — | — | — | 3.2 | |||||||||||||||||||
Stock options exercised | 167,026 | — | 3.3 | — | — | — | 3.3 | |||||||||||||||||||
Vesting of RSUs and PSUs, net of shares withheld to satisfy tax withholdings | 117,049 | — | (1.9 | ) | — | — | — | (1.9 | ) | |||||||||||||||||
Dividends declared | — | — | — | (9.8 | ) | — | — | (9.8 | ) | |||||||||||||||||
Net income for the period | — | — | 48.0 | — | — | 48.0 | ||||||||||||||||||||
Change in net unrealized gains on investments, net of taxes of $8.5 | — | — | — | 15.8 | — | 15.8 | ||||||||||||||||||||
Balance, June 30, 2017 | 56,510,352 | $ | 0.6 | $ | 376.6 | $ | 815.4 | $ | 90.3 | $ | (383.7 | ) | $ | 899.2 |
Employers Holdings, Inc. and Subsidiaries | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(in millions) | ||||||||
Six Months Ended | ||||||||
June 30, | ||||||||
2018 | 2017 | |||||||
Operating activities | (unaudited) | |||||||
Net income | $ | 68.1 | $ | 48.0 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3.8 | 4.2 | ||||||
Stock-based compensation | 3.8 | 3.1 | ||||||
Amortization of premium on investments, net | 4.4 | 7.5 | ||||||
Allowance for doubtful accounts | (2.5 | ) | 0.1 | |||||
Deferred income tax (benefit) expense | 16.8 | 6.0 | ||||||
Net realized and unrealized losses (gains) on investments | 2.4 | (3.3 | ) | |||||
Gain on redemption of notes payable | — | (2.1 | ) | |||||
Change in operating assets and liabilities: | ||||||||
Premiums receivable | (26.5 | ) | (28.5 | ) | ||||
Reinsurance recoverable on paid and unpaid losses | 24.1 | 20.5 | ||||||
Current federal income taxes | (7.1 | ) | (6.9 | ) | ||||
Unpaid losses and loss adjustment expenses | (38.2 | ) | (16.1 | ) | ||||
Unearned premiums | 41.9 | 30.8 | ||||||
Accounts payable, accrued expenses and other liabilities | 4.0 | (7.1 | ) | |||||
Deferred reinsurance gain—LPT Agreement | (8.9 | ) | (6.0 | ) | ||||
Other | 0.1 | (7.6 | ) | |||||
Net cash provided by operating activities | 86.2 | 42.6 | ||||||
Investing activities | ||||||||
Purchases of fixed maturity securities | (358.1 | ) | (202.1 | ) | ||||
Purchases of equity securities | (19.9 | ) | (10.7 | ) | ||||
Purchases of short-term investments | (34.9 | ) | (8.1 | ) | ||||
Proceeds from sale of fixed maturity securities | 168.4 | 43.0 | ||||||
Proceeds from sale of equity securities | 24.0 | 11.4 | ||||||
Proceeds from maturities and redemptions of fixed maturity securities | 187.7 | 96.8 | ||||||
Proceeds from maturities of short-term investments | 38.9 | 18.6 | ||||||
Net change in unsettled investment purchases and sales | 7.2 | 5.0 | ||||||
Capital expenditures and other | (10.1 | ) | (5.9 | ) | ||||
Net cash provided by (used in) investing activities | 3.2 | (52.0 | ) | |||||
Financing activities | ||||||||
Acquisition of common stock | (0.3 | ) | — | |||||
Cash transactions related to stock-based compensation | (2.7 | ) | 1.4 | |||||
Dividends paid to stockholders | (13.3 | ) | (9.8 | ) | ||||
Redemption of notes payable | — | (9.9 | ) | |||||
Payments on capital leases | (0.1 | ) | (0.1 | ) | ||||
Net cash used in financing activities | (16.4 | ) | (18.4 | ) | ||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 73.0 | (27.8 | ) | |||||
Cash, cash equivalents and restricted cash at the beginning of the period | 74.3 | 70.8 | ||||||
Cash, cash equivalents and restricted cash at the end of the period | $ | 147.3 | $ | 43.0 |
As of | As of | |||||||
June 30, 2018 | December 31, 2017 | |||||||
(in millions) | ||||||||
Cash and cash equivalents | $ | 146.3 | $ | 73.3 | ||||
Restricted cash and cash equivalents supporting reinsurance obligations | 1.0 | 1.0 | ||||||
Total cash, cash equivalents and restricted cash | $ | 147.3 | $ | 74.3 |
Three Months Ended | Six Months Ended | |||||||
June 30, 2018 | June 30, 2018 | |||||||
(in millions, except per share data) | ||||||||
LPT Reserve Adjustment | $ | (6.3 | ) | $ | (6.3 | ) | ||
Cumulative adjustment to the Deferred Gain(1) | (2.2 | ) | (2.2 | ) | ||||
Net income impact from this change in estimate | 2.2 | 2.2 | ||||||
Earnings per common share impact from this change in estimate: | ||||||||
Basic and Diluted | 0.07 | 0.07 |
(1) | The cumulative adjustment to the Deferred reinsurance gain–LPT Agreement (Deferred Gain) was also recognized in losses and LAE incurred in the Company's Consolidated Statement of Comprehensive Income, so that the Deferred Gain reflects the balance that would have existed had the revised loss and LAE reserves been recognized at the inception of the LPT Agreement. |
Three Months Ended | Six Months Ended | |||||||
June 30, 2018 | June 30, 2018 | |||||||
(in millions, except per share data) | ||||||||
LPT Contingent Commission Adjustment | $ | 0.5 | $ | 0.5 | ||||
Net income impact from this change in estimate | 0.5 | 0.5 | ||||||
Earnings per common share impact from this change in estimate: | ||||||||
Basic and Diluted | 0.02 | 0.02 |
June 30, 2018 | December 31, 2017 | |||||||||||||||
Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||
(in millions) | ||||||||||||||||
Financial assets | ||||||||||||||||
Total investments at fair value | $ | 2,598.9 | $ | 2,598.9 | $ | 2,677.7 | $ | 2,677.7 | ||||||||
Cash and cash equivalents | 146.3 | 146.3 | 73.3 | 73.3 | ||||||||||||
Restricted cash and cash equivalents | 1.0 | 1.0 | 1.0 | 1.0 | ||||||||||||
Financial liabilities | ||||||||||||||||
Notes payable | $ | 20.0 | $ | 23.5 | $ | 20.0 | $ | 23.6 |
• | Level 1 - Inputs are unadjusted quoted market prices for identical assets or liabilities in active markets at the measurement date. |
• | Level 2 - Inputs other than Level 1 prices that are observable for similar assets or liabilities through corroboration with market data at the measurement date. |
• | Level 3 - Inputs that are unobservable that reflect management's best estimate of what willing market participants would use in pricing the assets or liabilities at the measurement date. |
June 30, 2018 | December 31, 2017 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. Treasuries | $ | — | $ | 119.4 | $ | — | $ | — | $ | 137.0 | $ | — | ||||||||||||
U.S. Agencies | — | 11.5 | — | — | 11.8 | — | ||||||||||||||||||
States and municipalities | — | 568.7 | — | — | 642.5 | — | ||||||||||||||||||
Corporate securities | — | 1,079.5 | — | — | 1,118.0 | — | ||||||||||||||||||
Residential mortgage-backed securities | — | 433.1 | — | — | 389.3 | — | ||||||||||||||||||
Commercial mortgage-backed securities | — | 104.0 | — | — | 106.0 | — | ||||||||||||||||||
Asset-backed securities | — | 67.3 | — | — | 58.8 | — | ||||||||||||||||||
Other securities | — | 17.7 | — | — | — | — | ||||||||||||||||||
Total fixed maturity securities | $ | — | $ | 2,401.2 | $ | — | $ | — | $ | 2,463.4 | $ | — | ||||||||||||
Equity securities at fair value: | ||||||||||||||||||||||||
Industrial and miscellaneous | $ | 172.6 | $ | — | $ | — | $ | 181.7 | $ | — | $ | — | ||||||||||||
Non-redeemable preferred stock (FHLB) | — | — | — | — | — | 4.7 | ||||||||||||||||||
Other | 25.1 | — | — | 23.9 | — | — | ||||||||||||||||||
Total equity securities at fair value | 197.7 | — | — | 205.6 | — | 4.7 | ||||||||||||||||||
Short-term investments | — | — | — | — | 4.0 | — | ||||||||||||||||||
Total investments at fair value | $ | 197.7 | $ | 2,401.2 | $ | — | $ | 205.6 | $ | 2,467.4 | $ | 4.7 |
June 30, 2018 | December 31, 2017 | ||||||
(in millions) | |||||||
Cash and cash equivalents at fair value | $ | 61.3 | $ | 34.3 | |||
Cash equivalents measured at NAV, which approximates fair value | 85.0 | 39.0 | |||||
Total cash and cash equivalents | $ | 146.3 | $ | 73.3 |
Level 3 Securities | ||||||||
2018 | 2017 | |||||||
(in millions) | ||||||||
Beginning balance, January 1 | $ | 4.7 | $ | 11.9 | ||||
Transfers out of Level 3 (1) | (4.7 | ) | (7.0 | ) | ||||
Purchases and sales, net | — | (0.2 | ) | |||||
Ending balance, June 30 | $ | — | $ | 4.7 |
(1) | The transfer during the six months ended June 30, 2018 was the result of adoption of ASU 2016-01, which specified that FHLB stock shall be carried at cost and is no longer measured at fair value. Transfers during the six months ended June 30, 2017 were from Level 3 to Level 2 as observable market data became available for these securities. |
Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
(in millions) | ||||||||||||||||
At June 30, 2018 | ||||||||||||||||
Fixed maturity securities | ||||||||||||||||
U.S. Treasuries | $ | 120.4 | $ | 0.9 | $ | (1.9 | ) | $ | 119.4 | |||||||
U.S. Agencies | 11.3 | 0.3 | (0.1 | ) | 11.5 | |||||||||||
States and municipalities | 555.0 | 14.9 | (1.2 | ) | 568.7 | |||||||||||
Corporate securities | 1,095.9 | 6.5 | (22.9 | ) | 1,079.5 | |||||||||||
Residential mortgage-backed securities | 442.9 | 2.0 | (11.8 | ) | 433.1 | |||||||||||
Commercial mortgage-backed securities | 107.1 | — | (3.1 | ) | 104.0 | |||||||||||
Asset-backed securities | 67.6 | 0.2 | (0.5 | ) | 67.3 | |||||||||||
Other securities | 17.8 | — | (0.1 | ) | 17.7 | |||||||||||
Total fixed maturity securities | 2,418.0 | 24.8 | (41.6 | ) | 2,401.2 | |||||||||||
Total AFS investments | $ | 2,418.0 | $ | 24.8 | $ | (41.6 | ) | $ | 2,401.2 |
At December 31, 2017 | ||||||||||||||||
Fixed maturity securities | ||||||||||||||||
U.S. Treasuries | $ | 135.8 | $ | 2.0 | $ | (0.8 | ) | $ | 137.0 | |||||||
U.S. Agencies | 11.3 | 0.5 | — | 11.8 | ||||||||||||
States and municipalities | 617.0 | 25.5 | — | 642.5 | ||||||||||||
Corporate securities | 1,103.4 | 18.0 | (3.4 | ) | 1,118.0 | |||||||||||
Residential mortgage-backed securities | 388.3 | 3.6 | (2.6 | ) | 389.3 | |||||||||||
Commercial mortgage-backed securities | 106.5 | 0.4 | (0.9 | ) | 106.0 | |||||||||||
Asset-backed securities | 58.7 | 0.3 | (0.2 | ) | 58.8 | |||||||||||
Total fixed maturity securities | 2,421.0 | 50.3 | (7.9 | ) | 2,463.4 | |||||||||||
Equity securities at fair value | ||||||||||||||||
Industrial and miscellaneous | 100.8 | 81.5 | (0.6 | ) | 181.7 | |||||||||||
Non-redeemable preferred stock (FHLB) | 4.7 | — | — | 4.7 | ||||||||||||
Other | 11.2 | 12.7 | — | 23.9 | ||||||||||||
Total equity securities at fair value | 116.7 | 94.2 | (0.6 | ) | 210.3 | |||||||||||
Short-term investments | 4.0 | — | — | 4.0 | ||||||||||||
Total AFS investments | $ | 2,541.7 | $ | 144.5 | $ | (8.5 | ) | $ | 2,677.7 |
Cost | Estimated Fair Value | |||||||
(in millions) | ||||||||
At June 30, 2018 | ||||||||
Equity securities at fair value | ||||||||
Industrial and miscellaneous | $ | 99.4 | $ | 172.6 | ||||
Other | 14.1 | 25.1 | ||||||
Total equity securities at fair value | $ | 113.5 | $ | 197.7 |
Amortized Cost | Estimated Fair Value | |||||||
(in millions) | ||||||||
Due in one year or less | $ | 177.8 | $ | 178.3 | ||||
Due after one year through five years | 761.7 | 763.6 | ||||||
Due after five years through ten years | 730.0 | 720.6 | ||||||
Due after ten years | 130.9 | 134.3 | ||||||
Mortgage and asset-backed securities | 617.6 | 604.4 | ||||||
Total | $ | 2,418.0 | $ | 2,401.2 |
June 30, 2018 | December 31, 2017 | |||||||||||||||||||||
Estimated Fair Value | Gross Unrealized Losses | Number of Issues | Estimated Fair Value | Gross Unrealized Losses | Number of Issues | |||||||||||||||||
(in millions, except number of issues data) | ||||||||||||||||||||||
Less than 12 months: | ||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||
U.S. Treasuries | $ | 82.0 | $ | (1.6 | ) | 27 | $ | 86.0 | $ | (0.5 | ) | 28 | ||||||||||
U.S. Agencies | 3.7 | (0.1 | ) | 2 | — | — | — | |||||||||||||||
States and municipalities | 84.0 | (1.2 | ) | 24 | — | — | — | |||||||||||||||
Corporate securities | 811.5 | (21.0 | ) | 265 | 307.6 | (2.3 | ) | 113 | ||||||||||||||
Residential mortgage-backed securities | 310.0 | (8.1 | ) | 93 | 165.0 | (0.8 | ) | 45 | ||||||||||||||
Commercial mortgage-backed securities | 75.4 | (2.0 | ) | 34 | 41.8 | (0.2 | ) | 19 | ||||||||||||||
Asset-backed securities | 53.1 | (0.5 | ) | 37 | 29.3 | (0.2 | ) | 25 | ||||||||||||||
Other securities | 16.1 | (0.1 | ) | 23 | — | — | — | |||||||||||||||
Total less than 12 months | $ | 1,435.8 | $ | (34.6 | ) | 505 | $ | 629.7 | $ | (4.0 | ) | 230 | ||||||||||
12 months or greater: | ||||||||||||||||||||||
Fixed maturity securities | ||||||||||||||||||||||
U.S. Treasuries | $ | 17.7 | $ | (0.3 | ) | 9 | $ | 23.4 | $ | (0.3 | ) | 10 | ||||||||||
Corporate securities | 36.1 | (1.9 | ) | 15 | 53.2 | (1.1 | ) | 17 | ||||||||||||||
Residential mortgage-backed securities | 69.7 | (3.7 | ) | 32 | 77.1 | (1.8 | ) | 32 | ||||||||||||||
Commercial mortgage-backed securities | 20.2 | (1.1 | ) | 8 | 25.1 | (0.7 | ) | 8 | ||||||||||||||
Total 12 months or greater | $ | 143.7 | $ | (7.0 | ) | 64 | $ | 178.8 | $ | (3.9 | ) | 67 |
Gross Realized Gains | Gross Realized Losses | Change in Net Unrealized Gains (Losses) | Changes in Fair Value Reflected in Earnings | Changes in Fair Value Reflected in AOCI, before tax | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Three Months Ended June 30, 2018 | ||||||||||||||||||||
Fixed maturity securities | $ | 0.3 | $ | (0.3 | ) | $ | (14.3 | ) | $ | — | $ | (14.3 | ) | |||||||
Equity securities | 2.6 | (0.4 | ) | 3.5 | 5.7 | — | ||||||||||||||
Total investments | $ | 2.9 | $ | (0.7 | ) | $ | (10.8 | ) | $ | 5.7 | $ | (14.3 | ) | |||||||
Six Months Ended June 30, 2018 | ||||||||||||||||||||
Fixed maturity securities | $ | 2.1 | $ | (2.6 | ) | $ | (59.2 | ) | $ | (0.5 | ) | $ | (59.2 | ) | ||||||
Equity securities | 8.1 | (0.6 | ) | (9.4 | ) | (1.9 | ) | — | ||||||||||||
Total investments | $ | 10.2 | $ | (3.2 | ) | $ | (68.6 | ) | $ | (2.4 | ) | $ | (59.2 | ) |
Three Months Ended June 30, 2017 | ||||||||||||||||||||
Fixed maturity securities | $ | — | $ | — | $ | 12.5 | $ | — | $ | 12.5 | ||||||||||
Equity securities | 1.1 | — | (0.7 | ) | 1.1 | (0.7 | ) | |||||||||||||
Total investments | $ | 1.1 | $ | — | $ | 11.8 | $ | 1.1 | $ | 11.8 | ||||||||||
Six Months Ended June 30, 2017 | ||||||||||||||||||||
Fixed maturity securities | $ | 0.5 | $ | (0.1 | ) | $ | 18.9 | $ | 0.4 | $ | 18.9 | |||||||||
Equity securities | 3.1 | (0.2 | ) | 5.4 | 2.9 | 5.4 | ||||||||||||||
Total investments | $ | 3.6 | $ | (0.3 | ) | $ | 24.3 | $ | 3.3 | $ | 24.3 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in millions) | ||||||||||||||||
Fixed maturity securities | $ | 19.2 | $ | 17.3 | $ | 37.7 | $ | 35.0 | ||||||||
Equity securities | 1.7 | 1.7 | 3.3 | 3.5 | ||||||||||||
Cash equivalents and restricted cash | 0.3 | 0.1 | 0.5 | 0.2 | ||||||||||||
Gross investment income | 21.2 | 19.1 | 41.5 | 38.7 | ||||||||||||
Investment expenses | (0.9 | ) | (0.9 | ) | (1.8 | ) | (1.8 | ) | ||||||||
Net investment income | $ | 20.3 | $ | 18.2 | $ | 39.7 | $ | 36.9 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in millions) | ||||||||||||||||
Unpaid losses and LAE at beginning of period | $ | 2,258.1 | $ | 2,298.2 | $ | 2,266.1 | $ | 2,301.0 | ||||||||
Less reinsurance recoverable, excluding bad debt allowance, on unpaid losses and LAE | 531.1 | 572.9 | 537.0 | 580.0 | ||||||||||||
Net unpaid losses and LAE at beginning of period | 1,727.0 | 1,725.3 | 1,729.1 | 1,721.0 | ||||||||||||
Losses and LAE, net of reinsurance, incurred during the period related to: | ||||||||||||||||
Current period | 111.2 | 109.4 | 221.6 | 221.3 | ||||||||||||
Prior periods | (16.5 | ) | (0.3 | ) | (28.9 | ) | (0.3 | ) | ||||||||
Total net losses and LAE incurred during the period | 94.7 | 109.1 | 192.7 | 221.0 | ||||||||||||
Paid losses and LAE, net of reinsurance, related to: | ||||||||||||||||
Current period | 20.0 | 17.0 | 25.9 | 21.7 | ||||||||||||
Prior periods | 86.3 | 92.3 | 180.5 | 195.2 | ||||||||||||
Total net paid losses and LAE during the period | 106.3 | 109.3 | 206.4 | 216.9 | ||||||||||||
Ending unpaid losses and LAE, net of reinsurance | 1,715.4 | 1,725.1 | 1,715.4 | 1,725.1 | ||||||||||||
Reinsurance recoverable, excluding bad debt allowance, on unpaid losses and LAE | 512.5 | 559.8 | 512.5 | 559.8 | ||||||||||||
Unpaid losses and LAE at end of period | $ | 2,227.9 | $ | 2,284.9 | $ | 2,227.9 | $ | 2,284.9 |
June 30, 2018 | December 31, 2017 | ||||||
(in millions) | |||||||
Dekania Surplus Note, due April 29, 2034 | $ | 10.0 | $ | 10.0 | |||
Alesco Surplus Note, due December 15, 2034 | 10.0 | 10.0 | |||||
Total | $ | 20.0 | $ | 20.0 |
June 30, 2018 | December 31, 2017 | |||||||
(in millions) | ||||||||
Net unrealized (losses) gains on investments, before taxes | $ | (16.8 | ) | $ | 136.0 | |||
Deferred tax benefit (expense) on net unrealized (losses) gains | 3.5 | (28.6 | ) | |||||
Total accumulated other comprehensive (loss) income | $ | (13.3 | ) | $ | 107.4 |
Number Awarded | Weighted Average Fair Value on Date of Grant | Aggregate Fair Value on Date of Grant | ||||||||
(in millions) | ||||||||||
March 2018 | ||||||||||
RSUs(1) | 71,400 | $ | 40.30 | $ | 2.9 | |||||
RSUs(2) | 736 | 40.50 | — | |||||||
PSUs(3) | 96,940 | 40.30 | 3.9 | |||||||
May 2018 | ||||||||||
RSUs(4) | 13,347 | $ | 39.65 | $ | 0.5 |
(1) | The RSUs awarded in March 2018 were awarded to certain employees of the Company and vest 25% on March 15, 2019, and each of the subsequent three anniversaries of that date. The RSUs are subject to accelerated vesting in certain circumstances, including but not limited to: death, disability, retirement, or in connection with a change of control of the Company. |
(2) | The RSUs awarded in March 2018 were awarded to non-employee Directors of the Company and vested in full on May 25, 2018. |
(3) | The PSUs awarded in March 2018 were awarded to certain employees of the Company and have a performance period of two years followed by an additional one year vesting period. The PSU awards are subject to certain performance goals with payouts that range from 0% to 200% of the target awards. The value shown in the table represents the aggregate number of PSUs awarded at the target level. |
(4) | The RSUs awarded in May 2018 were awarded to non-employee Directors of the Company and vest in full on May 24, 2019. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in millions, except share data) | ||||||||||||||||
Net income—basic and diluted | $ | 42.5 | $ | 24.8 | $ | 68.1 | $ | 48.0 | ||||||||
Weighted average number of shares outstanding—basic | 32,880,023 | 32,469,137 | 32,843,448 | 32,398,858 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
PSUs | 202,149 | 235,617 | 253,098 | 272,754 | ||||||||||||
Stock options | 100,357 | 230,049 | 100,635 | 227,856 | ||||||||||||
RSUs | 40,177 | 57,795 | 62,578 | 83,460 | ||||||||||||
Dilutive potential shares | 342,683 | 523,461 | 416,311 | 584,070 | ||||||||||||
Weighted average number of shares outstanding—diluted | 33,222,706 | 32,992,598 | 33,259,759 | 32,982,928 |
June 30, 2018 | December 31, 2017 | |||||||
(in millions) | ||||||||
GAAP stockholders' equity | $ | 956.5 | $ | 947.7 | ||||
Deferred reinsurance gain–LPT Agreement | 154.7 | 163.6 | ||||||
Less: Accumulated other comprehensive (loss) income, net(1) | (13.3 | ) | 107.4 | |||||
Adjusted stockholders' equity(2) | $ | 1,124.5 | $ | 1,003.9 |
(1) | The adoption of ASU No. 2016-01 resulted in a $74.0 million reclassification adjustment from Accumulated other comprehensive income, net to Retained earnings as of January 1, 2018. |
(2) | Adjusted stockholders' equity is a non-GAAP measure consisting of total GAAP stockholders' equity plus the Deferred Gain, less Accumulated other comprehensive (loss) income, net. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in millions) | ||||||||||||||||
Gross premiums written | $ | 186.4 | $ | 184.5 | $ | 398.0 | $ | 382.1 | ||||||||
Net premiums written | $ | 185.0 | $ | 183.0 | $ | 395.2 | $ | 379.1 | ||||||||
Net premiums earned | $ | 178.0 | $ | 171.7 | $ | 354.6 | $ | 347.1 | ||||||||
Net investment income | 20.3 | 18.2 | 39.7 | 36.9 | ||||||||||||
Net realized and unrealized gains (losses) on investments | 5.7 | 1.1 | (2.4 | ) | 3.3 | |||||||||||
Gain on redemption of notes payable | — | 2.1 | — | 2.1 | ||||||||||||
Other income | 0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||
Total revenues | 204.1 | 193.2 | 392.0 | 389.5 | ||||||||||||
Losses and LAE | 87.8 | 106.1 | 183.2 | 215.0 | ||||||||||||
Commission expense | 24.5 | 21.5 | 48.2 | 43.0 | ||||||||||||
Underwriting and other operating expenses | 40.1 | 32.6 | 79.2 | 68.6 | ||||||||||||
Interest and financing expenses | 0.4 | 0.4 | 0.7 | 0.8 | ||||||||||||
Total expenses | 152.8 | 160.6 | 311.3 | 327.4 | ||||||||||||
Income tax expense | 8.8 | 7.8 | 12.6 | 14.1 | ||||||||||||
Net income | $ | 42.5 | $ | 24.8 | $ | 68.1 | $ | 48.0 | ||||||||
Less amortization of the Deferred Gain related to losses | $ | 3.6 | $ | 2.5 | $ | 5.7 | $ | 4.9 | ||||||||
Less amortization of the Deferred Gain related to contingent commission | 0.6 | 0.6 | 1.1 | 1.1 | ||||||||||||
Less impact of LPT Reserve Adjustments(1) | 2.2 | — | 2.2 | — | ||||||||||||
Less impact of LPT Contingent Commission Adjustments(2) | 0.5 | — | 0.5 | — | ||||||||||||
Net income before impact of the LPT Agreement(3) | $ | 35.6 | $ | 21.7 | $ | 58.6 | $ | 42.0 |
(1) | LPT Reserve Adjustments result in a cumulative adjustment to the Deferred Gain, which is recognized in losses and LAE incurred on our Consolidated Statements of Comprehensive Income, such that the Deferred Gain reflects the balance that would have existed had the revised reserves been recognized at the inception of the LPT Agreement. (See Note 2 in the Notes to our Consolidated Financial Statements.) |
(2) | LPT Contingent Commission Adjustments result in an adjustment to the Deferred Gain, which is recognized in losses and LAE incurred on our Consolidated Statements of Comprehensive Income, such that the Deferred Gain reflects the balance that would have existed had the revised contingent profit commission been recognized at the inception of the LPT Agreement. (See Note 2 in the Notes to our Consolidated Financial Statements.) |
(3) | We define net income before impact of the LPT Agreement as net income before the impact of: (a) amortization of the Deferred Gain; (b) adjustments to the LPT Agreement ceded reserves; and (c) adjustments to the Contingent commission receivable–LPT Agreement. The Deferred Gain reflects the unamortized gain from the LPT Agreement. Under GAAP, this gain is deferred and is being amortized using the recovery method in which amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries over the life of the LPT Agreement, except for the contingent profit commission, which is amortized through June 30, 2024. The amortization is reflected in losses and LAE. We periodically reevaluate the remaining direct reserves subject to the LPT Agreement and the expected losses and LAE subject to the contingent profit commission under the LPT Agreement. Our reevaluation results in corresponding adjustments, if needed, to reserves, ceded reserves, contingent commission receivable, and the Deferred Gain, with the net effect being an increase or decrease to our net income. Net income before impact of the LPT Agreement is not a measurement of financial performance under GAAP, but rather reflects a difference in accounting treatment between statutory and GAAP, and should not be considered in isolation or as an alternative to net income before income taxes or net income, or any other measure of performance derived in accordance with GAAP. |
As of June 30, 2018 | |||||||||||||||||
Year-to-Date Increase (Decrease) | Year-Over-Year Increase (Decrease) | ||||||||||||||||
Overall | California | All Other States | Overall | California | All Other States | ||||||||||||
In-force premiums | 3.9 | % | 1.2 | % | 7.4 | % | 4.9 | % | 1.3 | % | 9.4 | % | |||||
In-force policy count | 3.2 | (0.4 | ) | 6.5 | 3.3 | (2.3 | ) | 8.5 | |||||||||
Average in-force policy size | 0.7 | 1.6 | 0.9 | 1.6 | 3.7 | 0.8 | |||||||||||
In-force payroll exposure | 11.1 | 9.4 | 12.0 | 13.1 | 13.7 | 12.7 |
June 30, 2018 | December 31, 2017 | June 30, 2017 | December 31, 2016 | |||||||||||||||||||||||||
State | In-force Premiums | Policies In-force | In-force Premiums | Policies In-force | In-force Premiums | Policies In-force | In-force Premiums | Policies In-force | ||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||
California | $ | 353.6 | 40,400 | $ | 349.4 | 40,573 | $ | 348.9 | 41,346 | $ | 348.3 | 42,120 | ||||||||||||||||
Florida | 43.0 | 5,734 | 41.8 | 5,625 | 39.1 | 5,527 | 35.2 | 5,263 | ||||||||||||||||||||
Other (40 states and D.C.) | 255.1 | 42,108 | 235.7 | 39,296 | 233.4 | 38,569 | 235.1 | 37,439 | ||||||||||||||||||||
Total | $ | 651.7 | 88,242 | $ | 626.9 | 85,494 | $ | 621.4 | 85,442 | $ | 618.6 | 84,822 |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Loss and LAE ratio | 49.3 | % | 61.8 | % | 51.7 | % | 61.9 | % | ||||
Underwriting and other operating expenses ratio | 22.5 | 19.0 | 22.3 | 19.8 | ||||||||
Commission expense ratio | 13.8 | 12.5 | 13.6 | 12.4 | ||||||||
Combined ratio | 85.6 | % | 93.3 | % | 87.6 | % | 94.1 | % |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in millions) | ||||||||||||||||
Prior accident year favorable loss development, net | $ | 16.5 | $ | 0.3 | $ | 28.9 | $ | 0.3 | ||||||||
Amortization of the Deferred Gain related to losses | $ | 3.6 | $ | 2.5 | $ | 5.7 | $ | 4.9 | ||||||||
Amortization of the Deferred Gain related to contingent commission | 0.6 | 0.6 | 1.1 | 1.1 | ||||||||||||
Impact of LPT Reserve Adjustments | 2.2 | — | 2.2 | — | ||||||||||||
Impact of LPT Contingent Commission Adjustments | 0.5 | — | 0.5 | — | ||||||||||||
Total impact of the LPT on losses and LAE | 6.9 | 3.1 | 9.5 | 6.0 | ||||||||||||
Total losses and LAE reserve adjustments | $ | 23.4 | $ | 3.4 | $ | 38.4 | $ | 6.3 |
June 30, | ||||||||
2018 | 2017 | |||||||
(in millions) | ||||||||
Cash, cash equivalents, and restricted cash provided by (used in): | ||||||||
Operating activities | $ | 86.2 | $ | 42.6 | ||||
Investing activities | 3.2 | (52.0 | ) | |||||
Financing activities | (16.4 | ) | (18.4 | ) | ||||
Increase (decrease) in cash, cash equivalents, and restricted cash | $ | 73.0 | $ | (27.8 | ) |
Payment Due By Period | ||||||||||||||||||||
Total | Less Than 1-Year | 1-3 Years | 4-5 Years | More Than 5 Years | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Operating leases | $ | 24.9 | $ | 5.2 | $ | 8.5 | $ | 4.1 | $ | 7.1 | ||||||||||
Non-cancellable obligations | 19.3 | 3.3 | 7.8 | 6.2 | 2.0 | |||||||||||||||
Notes payable(1) | 41.0 | 1.3 | 2.6 | 2.6 | 34.5 | |||||||||||||||
Capital leases | 1.1 | 0.3 | 0.6 | 0.2 | — | |||||||||||||||
Unpaid losses and LAE reserves (2)(3) | 2,227.9 | 386.6 | 487.7 | 289.1 | 1,064.5 | |||||||||||||||
Total contractual obligations | $ | 2,314.2 | $ | 396.7 | $ | 507.2 | $ | 302.2 | $ | 1,108.1 |
(1) | Notes payable includes payments for the principal and estimated interest expense on our surplus notes outstanding based on LIBOR plus a margin. The interest rates used ranged from 6.4% to 6.6%. |
(2) | Estimated losses and LAE reserve payment patterns have been computed based on historical information. Our calculation of loss and LAE reserve payments by period is subject to the same uncertainties associated with determining the level of reserves and to the additional uncertainties arising from the difficulty of predicting when claims (including claims that have not yet been reported to us) will be paid. Actual payments of losses and LAE by period will vary, perhaps materially, from the above table to the extent that current estimates of losses and LAE reserves vary from actual ultimate claims amounts due to variations between expected and actual payout patterns. |
(3) | The unpaid losses and LAE reserves are presented gross of reinsurance recoverables for unpaid losses, which were as follows for each of the periods presented above: |
Recoveries Due By Period | ||||||||||||||||||||
Total | Less Than 1-Year | 1-3 Years | 4-5 Years | More Than 5 Years | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Reinsurance recoverables on unpaid losses and LAE | $ | (512.5 | ) | $ | (27.8 | ) | $ | (52.7 | ) | $ | (49.6 | ) | $ | (382.4 | ) |
Category | Estimated Fair Value | Percentage of Total | Book Yield | Tax Equivalent Yield (1) | |||||||||
(in millions, except percentages) | |||||||||||||
U.S. Treasuries | $ | 119.4 | 4.6 | % | 2.0 | % | 2.0 | % | |||||
U.S. Agencies | 11.5 | 0.4 | 4.3 | 4.3 | |||||||||
States and municipalities | 568.7 | 21.9 | 3.4 | 3.9 | |||||||||
Corporate securities | 1,079.5 | 41.5 | 3.2 | 3.2 | |||||||||
Residential mortgage-backed securities | 433.1 | 16.7 | 3.1 | 3.1 | |||||||||
Commercial mortgage-backed securities | 104.0 | 4.0 | 2.9 | 2.9 | |||||||||
Asset-backed securities | 67.3 | 2.6 | 3.2 | 3.2 | |||||||||
Other securities | 17.7 | 0.7 | 4.1 | 4.1 | |||||||||
Equity securities | 197.7 | 7.6 | 5.5 | 6.0 | |||||||||
Total investments at fair value | $ | 2,598.9 | 100.0 | % | |||||||||
Weighted average yield | 3.3 | % | 3.4 | % | |||||||||
(1) Computed using a statutory income tax rate of 21% |
Rating | Percentage of Total Estimated Fair Value | ||
“AAA” | 8.8 | % | |
“AA” | 45.7 | ||
“A” | 33.0 | ||
“BBB” | 12.1 | ||
Below investment grade | 0.4 | ||
Total | 100.0 | % |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program | ||||||||||
(in millions) | ||||||||||||||
April 1 – April 30, 2018 | — | $ | — | — | $ | 50.0 | ||||||||
May 1 – May 31, 2018 | 6,227 | 39.71 | 6,227 | 49.8 | ||||||||||
June 1 – June 30, 2018 | 3,570 | 39.86 | 3,570 | 49.6 | ||||||||||
Total | 9,797 | $ | 39.77 | 9,797 |
Incorporated by Reference Herein | |||||||||||||
Exhibit No. | Description of Exhibit | Included Herewith | Form | File No. | Exhibit | Filing Date | |||||||
*10.1 | 8-K | 001-33245 | 10.1 | March 13, 2018 | |||||||||
*10.2 | 8-K | 001-33245 | 10.2 | March 13, 2018 | |||||||||
*10.3 | 8-K | 001-33245 | May 29, 2018 | ||||||||||
*10.4 | 8-K | 001-33245 | May 29, 2018 | ||||||||||
10.5 | 8-K | 001-33245 | 10.1 | March 15, 2018 | |||||||||
10.6 | 8-K | 001-33245 | 10.2 | March 15, 2018 | |||||||||
10.7 | 8-K | 001-33245 | 10.3 | March 15, 2018 | |||||||||
10.8 | 8-K | 001-33245 | 10.4 | March 15, 2018 | |||||||||
10.9 | 8-K/A | 001-33245 | 10.1 | May 24, 2018 | |||||||||
10.10 | 8-K | 001-33245 | 3.1 | June 13, 2018 | |||||||||
31.1 | X | ||||||||||||
31.2 | X | ||||||||||||
32.1 | X | ||||||||||||
32.2 | X | ||||||||||||
101.INS | XBRL Instance Document | X | |||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document | X | |||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | |||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | |||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | |||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X |
Date: | July 26, 2018 | /s/ Michael S. Paquette |
Michael S. Paquette | ||
Executive Vice President and Chief Financial Officer | ||
Employers Holdings, Inc. | ||
(Principal Financial and Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Employers Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | July 26, 2018 | /s/ Douglas D. Dirks |
Douglas D. Dirks | ||
President and Chief Executive Officer | ||
Employers Holdings, Inc. |
1. | I have reviewed this quarterly report on Form 10-Q of Employers Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | July 26, 2018 | /s/ Michael S. Paquette |
Michael S. Paquette | ||
Executive Vice President and Chief Financial Officer | ||
Employers Holdings, Inc. | ||
(Principal Financial and Accounting Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | July 26, 2018 | /s/ Douglas D. Dirks |
Douglas D. Dirks | ||
President and Chief Executive Officer | ||
Employers Holdings, Inc. |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | July 26, 2018 | /s/ Michael S. Paquette |
Michael S. Paquette | ||
Executive Vice President and Chief Financial Officer | ||
Employers Holdings, Inc. | ||
(Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
6 Months Ended | |
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Jun. 30, 2018 |
Jul. 19, 2018 |
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Entity Registrant Name | Employers Holdings, Inc. | |
Entity Central Index Key | 0001379041 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well Know Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock Shares Outstanding | 32,759,375 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 |
Conolidated Statements of Comprehensive Income (Parentheticals) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Statement Parenthetical [Abstract] | ||||
Other comprehensive income (loss), unrealized holding gain (loss) on securities arising during period, tax | $ (3,000) | $ 4,500 | $ (12,600) | $ 9,700 |
Other comprehensive income (loss), reclassification adjustment for sale of securities included in net income, tax | $ 0 | $ 400 | $ (100) | $ 1,200 |
Conslidated Stockholders Equity (Parentheticals) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Statement of Stockholders' Equity Parenthetical [Abstract] | ||
Change in net unrealized (losses) gains on investments, net of tax | $ (12.5) | $ 8.5 |
Basis of Presentation |
6 Months Ended |
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Jun. 30, 2018 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Basis of Presentation and Summary of Operations Employers Holdings, Inc. (EHI) is a Nevada holding company. Through its wholly owned insurance subsidiaries, Employers Insurance Company of Nevada (EICN), Employers Compensation Insurance Company (ECIC), Employers Preferred Insurance Company (EPIC), and Employers Assurance Company (EAC), EHI is engaged in the commercial property and casualty insurance industry, specializing in workers' compensation products and services. Unless otherwise indicated, all references to the “Company” refer to EHI, together with its subsidiaries. In 1999, the Nevada State Industrial Insurance System (the Fund) entered into a retroactive 100% quota share reinsurance agreement (the LPT Agreement) through a loss portfolio transfer transaction with third party reinsurers. The LPT Agreement commenced on June 30, 1999 and will remain in effect until all claims under the covered policies have closed, the LPT Agreement is commuted or terminated, upon the mutual agreement of the parties, or the reinsurers' aggregate maximum limit of liability is exhausted, whichever occurs first. The LPT Agreement does not provide for any additional termination terms. On January 1, 2000, EICN assumed all of the assets, liabilities and operations of the Fund, including the Fund's rights and obligations associated with the LPT Agreement (See Note 8). The Company accounts for the LPT Agreement as retroactive reinsurance. Upon entry into the LPT Agreement, an initial deferred reinsurance gain (the Deferred Gain) was recorded as a liability on the Company’s Consolidated Balance Sheets. The Company is entitled to receive a contingent profit commission under the LPT Agreement. The contingent profit commission is estimated based on both actual paid results to date and projections of expected paid losses under the LPT Agreement and is recorded as an asset on the Company's Consolidated Balance Sheets. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of the Company’s consolidated financial position and results of operations for the periods presented have been included. The results of operations for an interim period are not necessarily indicative of the results for an entire year. These financial statements have been prepared consistent with the accounting policies described in the Company’s Form 10-K for the year ended December 31, 2017 (Annual Report). The Company operates as a single operating segment, workers' compensation insurance, through its wholly owned subsidiaries. The Company considers an operating segment to be any component of its business whose operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance based on discrete financial information. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. As a result, actual results could differ from these estimates. The most significant areas that require management judgment are the estimate of unpaid losses and loss adjustment expenses (LAE), evaluation of reinsurance recoverables, recognition of premium revenue, recoverability of deferred income taxes, and valuation of investments. Reclassifications Certain prior period information has been reclassified to conform to the current period presentation. Pending Acquisition On August 11, 2017, the Company entered into, and on May 23, 2018, the Company amended, a stock purchase agreement (Purchase Agreement) with Partner Reinsurance Company of the U.S. (PRUS) with respect to the acquisition (Acquisition) of all of the outstanding shares of capital stock of PartnerRe Insurance Company of New York (PRNY). The purchase price is equal to the sum of: (i) the amount of statutory capital and surplus of PRNY at closing (which is currently estimated to be approximately $40.0 million); and (ii) $5.8 million. The Company expects to fund the Acquisition with cash on hand. Pursuant to the Purchase Agreement, all liabilities and obligations of PRNY existing as of the closing date, whether known or unknown, will be indemnified by PRUS. In addition, PartnerRe Ltd., the parent company of PRUS, has provided the Company with a Guaranty that unconditionally, absolutely and irrevocably guarantees the full and prompt payment and performance by PRUS of all of its obligations, liabilities, and indemnities under the Purchase Agreement and the transactions contemplated thereby. The Company will not be acquiring any employees or ongoing business operations pursuant to the Acquisition. The Acquisition is subject to certain closing conditions, including, among other things, approval from the Department of Financial Services of the State of New York. |
Changes in Estimates Level 1 (Notes) |
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Change in Estimates | Change in Estimates The Company reduced its estimated loss and LAE reserves ceded under the Loss Portfolio Transfer Agreement (LPT Reserve Adjustment) as a result of the determination that an adjustment was necessary to reflect observed favorable paid loss trends during the second quarter of 2018. The following table shows the financial statement impact related to the LPT Reserve Adjustment.
The Company increased its estimate of Contingent commission receivable – LPT Agreement (LPT Contingent Commission Adjustment) as a result of the determination that an adjustment was necessary to reflect observed favorable paid loss trends during the second quarter of 2018. The following table shows the financial statement impact related to the LPT Contingent Commission Adjustment.
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New Accounting Standards Level 1 (Notes) |
6 Months Ended |
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Jun. 30, 2018 | |
New Accounting Standards [Abstract] | |
New Accounting Standards | New Accounting Standards Recently Issued Accounting Standards In February 2016, the FASB issued ASU Number 2016-02, Leases (Topic 842). This update provides guidance on a new lease model that includes the recognition of assets and liabilities arising from lease transactions on the balance sheet. Additionally, the update provides clarity on the definition of a lease and the distinction between finance and operating leases. Furthermore, the update requires certain qualitative and quantitative disclosures pertaining to the amounts recorded in the financial statements. This update becomes effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2018 and early adoption is permitted. The Company has determined that the impact of this new standard will be equal to the present value of the Company's lease obligations under various non-cancellable operating lease contracts, which amounted to approximately $23.0 million at June 30, 2018, and will be recognized as lease assets and liabilities on the Company's Balance Sheets upon adoption. Recently Adopted Accounting Standards In March 2018, the FASB issued ASU Number 2018-05, Income Taxes (Topic 740). This update provides guidance regarding the application of ASC Topic 740 for the income tax effects of the Tax Cuts and Jobs Act. This update allowed companies to report provisional amounts of the effects of the Tax Cuts and Jobs Act in their financial statements in the first reporting period they are able to determine a reasonable estimate and any adjustments to provisional amounts should be included in income from continuing operations as an adjustment to tax expense or benefit in the reporting period the amounts are determined. The Company adopted this update in the fourth quarter of 2017 and included an estimate of the income tax effects in its financial statements for the year ended December 31, 2017. The Company does not expect the amounts of any future income tax adjustments related to the effects of the Tax Cuts and Jobs Act to be material. In January 2016, the FASB issued ASU Number 2016-01, Financial Instruments - Overall (Subtopic 825-10). This update replaces the guidance to classify equity securities with readily determinable fair values into different categories (trading or available-for-sale) and requires those equity securities to be measured at fair value with changes in fair value recognized through net income. Additionally, this update eliminates the disclosure of the method and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost. It requires financial instruments to be measured at fair value using the exit price notion. Furthermore, this update clarifies that an evaluation of deferred tax assets related to available-for-sale securities is needed, in combination with an evaluation of other deferred tax assets, to determine if a valuation allowance is required. This update did not apply to the Company’s investment in Federal Home Loan Bank (FHLB) stock. Rather, it specified that FHLB stock shall be carried at cost and evaluated periodically for impairment; furthermore, it specified that, beginning January 1, 2018, FHLB stock shall not be shown with securities accounted for under ASC 321, which provides detailed guidance on, among other things, accounting and reporting of investments in equity securities that have readily determinable fair values. As a result, the Company’s investment in FHLB stock is presented within Equity securities at cost on the Company's Consolidated Balance Sheet at March 31, 2018. In all periods prior to January 1, 2018, the Company's investment in FHLB stock is presented within Equity securities at fair value on the Company's Consolidated Balance Sheets. This update became effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted this update effective January 1, 2018. Adoption of this accounting standard resulted in a $74.0 million reclassification adjustment, net of tax, from accumulated other comprehensive income to retained earnings. |
Fair Value of Financial Instruments |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying value and the estimated fair value of the Company’s financial instruments at fair value were as follows:
Assets and liabilities recorded at fair value on the Company's Consolidated Balance Sheets are categorized based upon the levels of judgment associated with the inputs used to measure their fair value. Level inputs are defined as follows:
The Company uses third party pricing services to assist it with its investment accounting function. The ultimate pricing source varies depending on the investment security and pricing service used, but investment securities valued on the basis of observable inputs (Levels 1 and 2) are generally assigned values on the basis of actual transactions. Securities valued on the basis of pricing models with significant unobservable inputs or non-binding broker quotes are classified as Level 3. The Company performs quarterly analyses on the prices it receives from third parties to determine whether the prices are reasonable estimates of fair value, including confirming the fair values of these securities through observable market prices using an alternative pricing source, as it is ultimately management’s responsibility to ensure that the fair values reflected in the Company’s consolidated financial statements are appropriate. If differences are noted in these analyses, the Company may obtain additional information from other pricing services to validate the quoted price. The Company bases all of its estimates of fair value for assets on the bid prices, when available, as they represent what a third-party market participant would be willing to pay in an arm's length transaction. For securities not actively traded, third party pricing services may use quoted market prices of similar instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, broker quotes, benchmark yields, credit spreads, default rates, and prepayment speed assumptions. There were no material adjustments made to the prices obtained from third party pricing services as of June 30, 2018 and December 31, 2017. These methods of valuation only produce an estimate of fair value if there is objectively verifiable information to produce a valuation. When objectively verifiable information is not available, the Company produces an estimate of fair value using some of the same methodologies, making assumptions for market-based inputs that are unavailable. The Company's estimates of fair value for its notes payable are based on a combination of the variable interest rates for notes with similar durations to discount the projection of future payments on notes payable. The fair value measurements for notes payable have been determined to be Level 2 at each of the periods presented. Each of the Company's insurance operating subsidiaries is a member of the FHLB of San Francisco. Members are required to purchase stock in FHLB in addition to maintaining collateral deposits that back any funds advanced. The Company's investment in FHLB stock is recorded at cost, as purchases and sales of these securities are at par value with the issuer. FHLB stock is considered a restricted security and is periodically evaluated by the Company for impairment based on the ultimate recovery of par value. The following table presents the Company's investments at fair value and the corresponding fair value measurements.
Certain cash equivalents, principally money market securities, are measured at fair value using the net asset value (NAV) per share. The following table presents cash equivalents at NAV and total cash and cash equivalents carried at fair value on the Company's Consolidated Balance Sheets.
The following table provides a reconciliation of the beginning and ending balances of investments that are recorded at fair value and are measured using Level 3 inputs for the six months ended June 30, 2018 and 2017.
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Investments |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments The Company's investments in fixed maturity securities, equity securities at fair value (prior to 2018), and short-term investments are classified as available-for-sale (AFS) that are reported at fair value with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity, net of deferred taxes, in Accumulated other comprehensive (loss) income (AOCI) on the Company’s Consolidated Balance Sheets. Beginning in 2018, with the adoption of ASU 2016-01, the Company's investments in equity securities at fair value are no longer classified as AFS and changes in fair value are included in Net realized and unrealized (losses) gains on investments on the Company's Consolidated Statements of Comprehensive Income. Effective January 1, 2018, the Company's investment in FHLB stock is presented within Equity securities at cost on the Company's Consolidated Balance Sheets. Other securities within fixed maturity securities consist of bank loans, which are classified as AFS and are reported at fair value. The cost or amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the Company’s AFS investments were as follows:
The cost and estimated fair value of the Company’s equity securities recorded at fair value at June 30, 2018 were as follows:
The amortized cost and estimated fair value of the Company's fixed maturity securities at June 30, 2018, by contractual maturity, are shown below. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
The following is a summary of AFS investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or greater as of June 30, 2018 and December 31, 2017.
At December 31, 2017, the Company also had $0.6 million of gross unrealized losses on 24 equity securities that were in a continuous loss position for less than 12 months. The Company recognized impairments on fixed maturity securities of $2.0 million (consisting of 57 securities) during the six months ended June 30, 2018 as a result of the Company's intent to sell these securities. There were no other-than-temporary impairments on fixed maturity securities recognized during the six months ended June 30, 2017. The Company determined that the remaining unrealized losses on fixed maturity securities for the six months ended June 30, 2018 were primarily the result of changes in prevailing interest rates and not the credit quality of the issuers. The fixed maturity securities whose total fair value was less than amortized cost were not determined to be other-than-temporarily impaired given the lack of severity and duration of the impairment, the credit quality of the issuers, the Company’s intent to not sell the securities, and a determination that it is not more likely than not that the Company will be required to sell the securities at an amount less than their amortized cost. The adoption of ASU 2016-01 removed the impairment assessment for equity securities at fair value, and, beginning in 2018, changes in fair value are included in Net realized and unrealized (losses) gains on investments on the Company's Consolidated Statements of Comprehensive Income. Prior to the adoption of this standard, the Company recognized an impairment on equity securities of $0.2 million (consisting of one security) during the six months ended June 30, 2017. The other-than-temporary impairment recognized during this period was the result of the severity and duration of the change in fair value of this security. Certain unrealized losses on equity securities during the six months ended June 30, 2017 were not considered to be other-than-temporary due to the financial condition and near-term prospects of the issuers, and the Company's intent to hold the securities until fair value recovers to above cost. 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 on fixed maturity securities are also recognized when securities are written down as a result of an other-than-temporary impairment. Net realized gains on investments and the change in unrealized gains (losses) on the Company's investments recorded at fair value are determined on a specific-identification basis and were as follows:
Net investment income was as follows:
The Company is required by various state laws and regulations to hold securities or letters of credit in depository accounts with certain states in which it does business. These laws and regulations govern not only the amount but also the types of securities that are eligible for deposit. As of June 30, 2018 and December 31, 2017, securities having a fair value of $954.4 million and $1,009.7 million, respectively, were on deposit. Additionally, standby letters of credit from the FHLB were in place in lieu of $140.0 million of securities on deposit as of June 30, 2018 (See Note 9). Certain reinsurance contracts require the Company's funds to be held in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities assumed by the Company. The fair value of fixed maturity securities and restricted cash and cash equivalents held in trust for the benefit of ceding reinsurers at June 30, 2018 and December 31, 2017 was $22.9 million and $24.5 million, respectively. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2018 | |
Income Taxes [Abstract] | |
Income Taxes | Income Taxes Income tax expense for interim periods is measured using an estimated effective tax rate for the annual period. The Company's effective tax rates were 17.2% and 15.6% for the three and six months ended June 30, 2018, respectively, compared to 23.9% and 22.7% for the same periods of 2017. Tax-advantaged investment income, Deferred Gain amortization, LPT Reserve Adjustments, LPT Contingent Commission Adjustments, and certain other adjustments reduced the Company's effective income tax rate below the U.S. statutory rates of 21% and 35% for periods in 2018 and 2017, respectively. |
Liability for Unpaid Losses and Loss Adjustment Expenses |
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Liability for Unpaid Losses and Loss Adjustment Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Unpaid Losses and Loss Adjustment Expenses | Liability for Unpaid Losses and Loss Adjustment Expenses The following table represents a reconciliation of changes in the liability for unpaid losses and LAE.
Total net losses and LAE included in the above table exclude amortization of the deferred reinsurance gain—LPT Agreement, LPT Reserve Adjustments, and LPT Contingent Commission Adjustments, which totaled $6.9 million and $3.1 million for the three months ended June 30, 2018 and 2017, respectively, and $9.5 million and $6.0 million for the six months ended June 30, 2018 and 2017, respectively (See Note 8). The change in incurred losses and LAE attributable to prior periods included $16.5 million and $28.5 million of favorable development on the Company's voluntary risk business for the three and six months ended June 30, 2018, respectively, and $0.4 million of favorable development on the Company's assigned risk business for the six months ended June 30, 2018. |
LPT Agreement |
6 Months Ended |
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Jun. 30, 2018 | |
LPT Agreement [Abstract] | |
LPT Agreement | LPT Agreement The Company is party to the LPT Agreement under which $1.5 billion in liabilities for losses and LAE related to claims incurred by the Fund prior to July 1, 1995 were reinsured for consideration of $775.0 million. The LPT Agreement provides coverage up to $2.0 billion. The Company records its estimate of contingent profit commission in the accompanying Consolidated Balance Sheets as Contingent commission receivable–LPT Agreement and a corresponding liability is recorded in the accompanying Consolidated Balance Sheets in Deferred reinsurance gain–LPT Agreement. The Deferred Gain is being amortized using the recovery method. Amortization is determined by the proportion of actual reinsurance recoveries to total estimated recoveries over the life of the LPT Agreement, except for the contingent profit commission, which is amortized through June 30, 2024, the date through which the Company is entitled to receive a contingent profit commission under the LPT Agreement. The amortization is recorded in losses and LAE incurred in the accompanying consolidated statements of comprehensive income. Any adjustments to the Deferred Gain are recorded in losses and LAE incurred in the accompanying consolidated statements of comprehensive income. The Company amortized $4.2 million and $3.1 million of the Deferred Gain for the three months ended June 30, 2018 and 2017, respectively, and $6.8 million and $6.0 million for the six months ended June 30, 2018 and 2017, respectively. Additionally, the Deferred Gain was further reduced by $2.2 million for the three and six months ended June 30, 2018 due to a favorable LPT Reserve Adjustment and by $0.5 million of amortization for the three and six months ended June 30, 2018 due to a favorable LPT Contingent Commission Adjustment (see Note 2). The remaining Deferred Gain was $154.7 million and $163.6 million as of June 30, 2018 and December 31, 2017, respectively. The estimated remaining liabilities subject to the LPT Agreement were $420.3 million and $438.9 million as of June 30, 2018 and December 31, 2017, respectively. Losses and LAE paid with respect to the LPT Agreement totaled $761.6 million and $749.3 million from inception through June 30, 2018 and December 31, 2017, respectively. |
Notes Payable Level 1 (Notes) |
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Debt Disclosure [Text Block] | Notes Payable and Other Financing Arrangements Notes payable is comprised of the following:
EPIC has a $10.0 million surplus note to Dekania CDO II, Ltd. issued as part of a pooled transaction. The note matures in 2034 and became callable by the Company in 2009. The terms of the note provide for quarterly interest payments at a rate 425 basis points in excess of the 90-day LIBOR. Both the payment of interest and repayment of the principal under this note and the surplus note described in the following paragraph are subject to the prior approval of the Florida Department of Financial Services. EPIC has a $10.0 million surplus note to Alesco Preferred Funding V, LTD issued as part of a pooled transaction. The note matures in 2034 and became callable by the Company in 2009. The terms of the note provide for quarterly interest payments at a rate 405 basis points in excess of the 90-day LIBOR. Other financing arrangements is comprised of the following: Each of the Company's insurance subsidiaries is a member of the FHLB. Membership allows the insurance 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 statutory admitted assets on a per company basis. Currently, none of the Company's insurance subsidiaries has advances outstanding under the FHLB facility. FHLB membership also allows the Company's insurance subsidiaries access to standby letters of credit. On March 9, 2018, ECIC, EPIC, and EAC entered into standby Letter of Credit Reimbursement Agreements (Letter of Credit Agreements) with the FHLB. The Letter of Credit Agreements are between FHLB and each of EAC, in the amount of $40.0 million, ECIC, in the amount of $50.0 million, and EPIC, in the amount of $50.0 million. The Letter of Credit Agreements became effective March 9, 2018 and expire March 31, 2019; however, the Letter of Credit Agreements will remain evergreen with automatic one-year extensions unless the FHLB notifies the beneficiary at least 60 days prior to the then applicable expiration date of its election not to renew. The Letter of Credit Agreements may only be used to satisfy, in whole or in part, insurance deposit requirements with the State of California and are fully secured with eligible collateral at all times. The Letter of Credit Agreements are subject to annual maintenance charges and a fee of 15 basis points on issued amounts. As of June 30, 2018, letters of credit totaling $140.0 million were issued in lieu of securities on deposit with the State of California under these Letter of Credit Agreements. As of June 30, 2018, investment securities having a fair value of $258.7 million were pledged to FHLB by the Company's insurance subsidiaries in support of the collateralized advance facility and the Letter of Credit Agreements. |
Accumulated Other Comprehensive Income |
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Accumulated Other Comprehensive Income, Net | Accumulated Other Comprehensive Income Accumulated other comprehensive income is comprised of unrealized (losses) gains on investments classified as AFS, net of deferred tax expense. Beginning in 2018, with the adoption of ASU No. 2016-01, the Company's investments in equity securities at fair value are no longer considered to be AFS and are reported at fair value with unrealized gains and losses included in Net realized and unrealized (losses) gains on investments on the Company's Consolidated Statements of Comprehensive Income. Prior to 2018, investments in equity securities at fair value were classified as AFS and changes in fair value were excluded from earnings and reported in accumulated other comprehensive income. The following table summarizes the components of accumulated other comprehensive (loss) income:
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Stock-Based Compensation |
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Stock-Based compensation | Stock-Based Compensation The Company awarded restricted stock units (RSUs) and performance share units (PSUs) to certain employees and non-employee Directors of the Company as follows:
Employees who were awarded RSUs and PSUs are entitled to receive dividend equivalents for eligible awards, payable in cash, when the underlying award vests and becomes payable. If the underlying award does not vest or is forfeited, any dividend equivalents with respect to the underlying award will also fail to become payable and will be forfeited. Stock options exercised totaled 13,800 for the six months ended June 30, 2018, 167,026 for the six months ended June 30, 2017, and 307,076 for the year ended December 31, 2017. As of June 30, 2018, the Company had 233,547 options, 313,426 RSUs, and 266,535 PSUs (based on target number awarded) outstanding. |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding for the period. Diluted earnings per share reflects the potential dilutive impact of all common stock equivalents on earnings per share. Diluted earnings per share includes shares that are assumed to be issued under the “treasury stock method,” which reflects the potential dilution that would occur if outstanding RSUs and PSUs had vested and options were to be exercised. Commencing in 2017, certain stock-based compensation awards are eligible to receive dividend equivalents on awards that fully vest or become payable. The dividend equivalents are reflected in the Company's net income; therefore, these awards are not considered participating securities for the purposes of determining earnings per share. The following table presents the net income and the weighted average number of shares outstanding used in the earnings per common share calculations.
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Changes in Estimates (Tables) |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Estimates [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change Due to Estimated Reserves Ceded Under the LPT Agreement [Table Text Block] | The Company reduced its estimated loss and LAE reserves ceded under the Loss Portfolio Transfer Agreement (LPT Reserve Adjustment) as a result of the determination that an adjustment was necessary to reflect observed favorable paid loss trends during the second quarter of 2018. The following table shows the financial statement impact related to the LPT Reserve Adjustment.
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ChangetoContingentProfitCommission [Table Text Block] | The Company increased its estimate of Contingent commission receivable – LPT Agreement (LPT Contingent Commission Adjustment) as a result of the determination that an adjustment was necessary to reflect observed favorable paid loss trends during the second quarter of 2018. The following table shows the financial statement impact related to the LPT Contingent Commission Adjustment.
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Fair Value of Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated fair value of financial instruments table | The carrying value and the estimated fair value of the Company’s financial instruments at fair value were as follows:
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Fair value, assets and liabilities measured on recurring basis table | The following table presents the Company's investments at fair value and the corresponding fair value measurements.
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Schedule of Cash and Cash Equivalents [Table Text Block] | The following table presents cash equivalents at NAV and total cash and cash equivalents carried at fair value on the Company's Consolidated Balance Sheets.
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Fair value, assets measured on recurring basis, unobservable input reconciliation table | The following table provides a reconciliation of the beginning and ending balances of investments that are recorded at fair value and are measured using Level 3 inputs for the six months ended June 30, 2018 and 2017.
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Investments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities table | The cost or amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the Company’s AFS investments were as follows:
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Equity securities table | The cost and estimated fair value of the Company’s equity securities recorded at fair value at June 30, 2018 were as follows:
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Investments classified by contractual maturity date table | The amortized cost and estimated fair value of the Company's fixed maturity securities at June 30, 2018, by contractual maturity, are shown below. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
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Unrealized loss on investments table | The following is a summary of AFS investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or greater as of June 30, 2018 and December 31, 2017.
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Unrealized gain (loss) on investments | Net realized gains on investments and the change in unrealized gains (losses) on the Company's investments recorded at fair value are determined on a specific-identification basis and were as follows:
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Investment income table | Net investment income was as follows:
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Liability for Unpaid Losses and Loss Adjustment Expenses (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Unpaid Losses and Loss Adjustment Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the liability for unpaid losses and LAE table | The following table represents a reconciliation of changes in the liability for unpaid losses and LAE.
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Notes Payable (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt instruments table | Notes payable is comprised of the following:
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Accumulated Other Comprehensive Income (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accumulated other comprehensive income (loss) table | The following table summarizes the components of accumulated other comprehensive (loss) income:
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Stock-Based Compensation Stock-Based Compensation (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation arrangements by share-based payment award table | The Company awarded restricted stock units (RSUs) and performance share units (PSUs) to certain employees and non-employee Directors of the Company as follows:
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Earnings Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income and weighted average common shares outstanding used in earnings per share calculations table | The following table presents the net income and the weighted average number of shares outstanding used in the earnings per common share calculations.
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Basis of Presentation Pending Purchase of PRUS (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Business Acquisition [Line Items] | |
Estimated statutory capital and surplus of pending acquisition | $ 40.0 |
Net cash payment to acquire business | $ 5.8 |
Changes in Estimates (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|||
Change in Accounting Estimate [Line Items] | ||||||
Net income | $ 42,500 | $ 24,800 | $ 68,100 | $ 48,000 | ||
Change Due to Estimated Reserves Ceded Under the LPT Agreement [Member] | ||||||
Change in Accounting Estimate [Line Items] | ||||||
LPT reserve adjustment | (6,300) | (6,300) | ||||
Cumulative adjustment to the Deferred Gain | [1] | (2,200) | (2,200) | |||
Net income | $ 2,200 | $ 2,200 | ||||
Basic and Diluted | $ 0.07 | $ 0.07 | ||||
Change to Contingent Profit Commission [Member] | ||||||
Change in Accounting Estimate [Line Items] | ||||||
Net income | $ 500 | $ 500 | ||||
Change in estimate of contingent commission receivable | $ 500 | $ 500 | ||||
Basic and Diluted | $ 0.02 | $ 0.02 | ||||
|
New Accounting Standards Adopted ASU (Details) - Accounting Standards Update 2016-01 [Member] $ in Millions |
Jun. 30, 2018
USD ($)
|
---|---|
Reclassification adjustment for adoption of ASU | $ 0.0 |
Accumulated Other Comprehensive Income, Net | |
Reclassification adjustment for adoption of ASU | (74.0) |
Retained Earnings | |
Reclassification adjustment for adoption of ASU | $ 74.0 |
New Accounting Standards Not Yet Adopted ASU (Details) $ in Millions |
Jun. 30, 2018
USD ($)
|
---|---|
Accounting Standards Update 2016-02 [Member] | |
Operating Lease, Liability | $ 23.0 |
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Total investments at fair value | $ 2,598,900 | $ 2,677,700 |
Total Investments at fair value, estimated fair value | 2,598,900 | 2,677,700 |
Cash and cash equivalents | 146,300 | 73,300 |
Cash and cash equivalents, estimated fair value | 146,300 | 73,300 |
Equity securities at cost | 6,400 | 0 |
Restricted cash and cash equivalents | 1,000 | 1,000 |
Notes payable | 20,000 | 20,000 |
Notes Payable, estimated fair value | 23,500 | 23,600 |
Estimate of Fair Value, Fair Value Disclosure [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Restricted cash and cash equivalents | $ 1,000 | $ 1,000 |
Fair Value of Financial Instruments Cash Equivalents at NAV and Total Cash and Cash Equivalents Carried at Fair Value (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Cash and Cash Equivalents [Line Items] | ||
Cash and cash equivalents at fair value | $ 61.3 | $ 34.3 |
Cash equivalents measured at NAV, which approximates fair value | 85.0 | 39.0 |
Total cash and cash equivalents | $ 146.3 | $ 73.3 |
Fair Value of Financial Instruments Fair Value of Financial Instruments, Reconciliation of Level 3 Securities (Details) - USD ($) $ in Thousands |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Beginning balance, January 1 | $ 2,677,700 | ||||
Ending balance, March 31 | 2,605,300 | ||||
Fair Value, Inputs, Level 3 [Member] | |||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Beginning balance, January 1 | 4,700 | $ 11,900 | |||
Transfers out of Level 3 (1) | (4,700) | [1] | (7,000) | ||
Purchases and sales, net | 0 | (200) | |||
Ending balance, March 31 | $ 0 | $ 4,700 | |||
|
Investments Equity Securities (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Schedule of Equity Securities and Other [Line Items] | |
Equity securities at fair value, cost | $ 113,500 |
Equity securities, estimated fair value | 197,700 |
Industrial and Miscellaneous [Member] | |
Schedule of Equity Securities and Other [Line Items] | |
Equity securities at fair value, cost | 99,400 |
Equity securities, estimated fair value | 172,600 |
Other [Member] | |
Schedule of Equity Securities and Other [Line Items] | |
Equity securities at fair value, cost | 14,100 |
Equity securities, estimated fair value | $ 25,100 |
Investments, Amortized Cost and Estimated Fair Value (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Amortized Cost | ||
Due in one year or less, amortized cost | $ 177,800 | |
Due after one year through five years, amortized cost | 761,700 | |
Due after five years through ten years, amortized cost | 730,000 | |
Due after ten years, amortized cost | 130,900 | |
Mortgage and asset-backed securities, amortized cost | 617,600 | |
Total, amortized cost | 2,418,000 | |
Estimated Fair Value | ||
Due in one year or less, fair value | 178,300 | |
Due after one year through five years, fair value | 763,600 | |
Due after five years through ten years, fair value | 720,600 | |
Due after ten years, fair value | 134,300 | |
Mortgage and asset-backed securities, fair value | 604,400 | |
Total, fair value | $ 2,401,200 | $ 2,463,400 |
Net Investment Income (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Gross investment income | $ 21.2 | $ 19.1 | $ 41.5 | $ 38.7 |
Investment expenses | 0.9 | 0.9 | 1.8 | 1.8 |
Net investment income | 20.3 | 18.2 | 39.7 | 36.9 |
Debt Securities [Member] | ||||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Investment income related to fixed maturity securities and short-term investments and cash equivalents | 19.2 | 17.3 | 37.7 | 35.0 |
Equity Securities [Member] | ||||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Investment income related to equity securities | 1.7 | 1.7 | 3.3 | 3.5 |
Short-term Investments [Member] | ||||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | ||||
Investment income related to fixed maturity securities and short-term investments and cash equivalents | $ 0.3 | $ 0.1 | $ 0.5 | $ 0.2 |
Investments Investments, Held in Trust or on Deposit (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Deposit Assets [Abstract] | ||
Investments | $ 2,605,300 | $ 2,677,700 |
Assets Held-in-trust [Abstract] | ||
Funds Held under Reinsurance Agreements, Asset | 22,900 | 24,500 |
Federal Home Loan Bank [Member] | ||
Deposit Assets [Abstract] | ||
Investments | 140,000 | |
Required by various state laws and regulations to hold securities or letters of credit in depository account [Member] | ||
Deposit Assets [Abstract] | ||
Investments | $ 954,400 | $ 1,009,700 |
Income Taxes (Details) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Effective Income Tax Rate, Continuing Operations, Tax Rate Reconciliation [Abstract] | ||||
Statutory tax rate | 21.00% | 35.00% | ||
Effective tax rate | 17.20% | 23.90% | 15.60% | 22.70% |
LPT Agreement LPT Agreement (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|||
Reinsurance Agreement [Line Items] | |||||||
Impact of the LPT Agreement | $ 6,900 | $ 3,100 | $ 9,500 | $ 6,000 | |||
Liabilities for the incurred but unpaid losses and LAE related to claims prior to July 1, 1995 | 1,500,000 | 1,500,000 | |||||
Ceded premiums written | 775,000 | ||||||
Amortization of deferred gain | 4,200 | $ 3,100 | 6,800 | $ 6,000 | |||
Deferred reinsurance gain—LPT Agreement | 154,700 | 154,700 | $ 163,600 | ||||
Estimated remaining liabilities - LPT Agreement | 420,300 | 420,300 | 438,900 | ||||
Paid losses and LAE claims related to LPT | 761,600 | 761,600 | $ 749,300 | ||||
Indemnification Agreement [Member] | |||||||
Reinsurance Agreement [Line Items] | |||||||
Coverage provided under LPT Agreement | 2,000,000 | 2,000,000 | |||||
Change Due to Estimated Reserves Ceded Under the LPT Agreement [Member] | |||||||
Reinsurance Agreement [Line Items] | |||||||
LPT reserve adjustment | [1] | 2,200 | 2,200 | ||||
Change to Contingent Profit Commission [Member] | |||||||
Reinsurance Agreement [Line Items] | |||||||
Change in estimate of contingent commission receivable | $ 500 | $ 500 | |||||
|
Notes Payable Notes Payable Outstanding(Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Debt Instrument [Line Items] | ||
Notes payable | $ 20,000 | $ 20,000 |
Dekania Surplus Note [Member] | ||
Debt Instrument [Line Items] | ||
Notes payable | $ 10,000 | 10,000 |
Notes payable, maturity date | Apr. 30, 2034 | |
Notes payable, callable | 2009 | |
Interest rate, basis points in excess of the 90-day LIBOR | 425 | |
Alesco Surplus Note [Member] | ||
Debt Instrument [Line Items] | ||
Notes payable | $ 10,000 | $ 10,000 |
Notes payable, maturity date | Dec. 15, 2034 | |
Notes payable, callable | 2009 | |
Interest rate, basis points in excess of the 90-day LIBOR | 405 |
Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Net unrealized gain on investments, before taxes | $ (16,800) | $ 136,000 |
Deferred tax expense on net unrealized gains | 3,500 | (28,600) |
Accumulated other comprehensive income, net | $ (13,300) | $ 107,400 |
Earnings Per Share (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Earnings Per Share, Basic and Diluted, by Common Class [Line Items] | ||||
Net income available to stockholders - basic and diluted | $ 42,500 | $ 24,800 | $ 68,100 | $ 48,000 |
Weighted average number of shares outstanding - basic | 32,880,023 | 32,469,137 | 32,843,448 | 32,398,858 |
Effect of dilutive securities: | ||||
Dilutive securities | 342,683 | 523,461 | 416,311 | 584,070 |
Weighted average number of shares outstanding - diluted | 33,222,706 | 32,992,598 | 33,259,759 | 32,982,928 |
Performance Shares [Member] | ||||
Effect of dilutive securities: | ||||
Dilutive securities | 202,149 | 235,617 | 253,098 | 272,754 |
Employee Stock Option [Member] | ||||
Effect of dilutive securities: | ||||
Dilutive securities | 100,357 | 230,049 | 100,635 | 227,856 |
Restricted Stock Units (RSUs) [Member] | ||||
Effect of dilutive securities: | ||||
Dilutive securities | 40,177 | 57,795 | 62,578 | 83,460 |
Label | Element | Value |
---|---|---|
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | us-gaap_CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents | $ 147,300,000 |
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