10-Q 1 eig-20240331.htm 10-Q eig-20240331
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____  to ____

Commission file number: 001-33245

EMPLOYERS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada04-3850065
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification Number)
2340 Corporate Circle, Suite 200
Henderson,Nevada89074
(Address of principal executive offices and zip code)
(888682-6671
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareEIGNew York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of April 23, 2024, there were 25,343,504 shares of the registrant's common stock outstanding.



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PART IFINANCIAL INFORMATION
Item 1.  Consolidated Financial Statements
Employers Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions, except share data)
As ofAs of
March 31,
2024
December 31,
2023
Assets(unaudited)
Investments:  
Fixed maturity securities at fair value (amortized cost $2,139.7 at March 31, 2024 and $2,048.0 at December 31, 2023, less CECL allowance of $3.2 at March 31, 2024 and $2.7 at December 31, 2023)
$2,013.8 $1,936.3 
Equity securities at fair value (cost $125.9 at March 31, 2024 and $125.9 at December 31, 2023)
224.3 211.2 
Equity securities at cost
6.0 6.0 
Other invested assets (cost $88.9 at March 31, 2024 and $82.5 at December 31, 2023)
97.6 91.5 
Short-term investments at fair value (amortized cost $38.2 at March 31, 2024 and $33.1 at December 31, 2023)
38.2 33.1 
Total investments2,379.9 2,278.1 
Cash and cash equivalents114.2 226.4 
Restricted cash and cash equivalents0.2 0.2 
Accrued investment income16.5 16.3 
Premiums receivable (less CECL allowance of $19.7 at March 31, 2024 and $17.9 at December 31, 2023)
380.4 359.4 
Reinsurance recoverable for:
Paid losses 6.7 6.3 
Unpaid losses (less CECL allowance of $0.9 at March 31, 2024 and $0.9 at December 31, 2023)
423.1 427.5 
Deferred policy acquisition costs59.4 55.6 
Deferred income tax asset, net42.1 43.4 
Property and equipment, net6.6 6.5 
Operating lease right-of-use assets4.7 5.1 
Intangible assets, net13.6 13.6 
Goodwill36.2 36.2 
Contingent commission receivable—LPT Agreement14.4 14.2 
Cloud computing arrangements25.2 28.0 
Other assets39.6 33.6 
Total assets$3,562.8 $3,550.4 
Liabilities and stockholders’ equity  
Claims and policy liabilities:  
Unpaid losses and loss adjustment expenses$1,874.5 $1,884.5 
Unearned premiums402.3 379.7 
Commissions and premium taxes payable60.9 66.0 
Accounts payable and accrued expenses18.2 26.1 
Deferred reinsurance gain—LPT Agreement97.2 99.2 
Operating lease liability5.5 5.9 
Non-cancellable obligations14.1 17.0 
Other liabilities71.2 58.1 
Total liabilities$2,543.9 $2,536.5 
Commitments and contingencies
2


Employers Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions, except share data)
As ofAs of
March 31,
2024
December 31,
2023
Stockholders’ equity:(unaudited) 
Common stock, $0.01 par value; 150,000,000 shares authorized; 58,152,792 and 58,055,968 shares issued and 25,343,504 and 25,369,753 shares outstanding at March 31, 2024 and December 31, 2023, respectively
$0.6 $0.6 
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued  
Additional paid-in capital419.5 419.8 
Retained earnings1,405.4 1,384.3 
Accumulated other comprehensive loss, net of tax(96.9)(86.0)
Treasury stock, at cost (32,809,288 shares at March 31, 2024 and 32,686,215 shares at December 31, 2023)
(709.7)(704.8)
Total stockholders’ equity1,018.9 1,013.9 
Total liabilities and stockholders’ equity$3,562.8 $3,550.4 
See accompanying unaudited notes to the consolidated financial statements.
3


Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in millions, except per share data)
Three Months Ended
 March 31,
 20242023
Revenues(unaudited)
Net premiums earned$184.9 $172.7 
Net investment income26.8 27.6 
Net realized and unrealized gains on investments
11.4 6.4 
Other income (loss)  (0.2)
Total revenues223.1 206.5 
Expenses  
Losses and loss adjustment expenses116.5 107.4 
Commission expense25.5 23.4 
Underwriting and general and administrative expenses45.8 44.4 
Interest and financing expenses 2.3 
Total expenses187.8 177.5 
Net Income before income taxes35.3 29.0 
Income tax expense
7.0 5.4 
Net Income$28.3 $23.6 
Comprehensive (loss) income
Unrealized AFS investment (losses) gains arising during the period, net of tax benefit (expense) of $3.0 and $(6.0) for the three months ended March 31, 2024 and 2023, respectively
$(11.6)$22.5 
Reclassification adjustment for realized AFS investment losses in net income, net of tax benefit of $(0.2) and $(0.3) for the three months ended March 31, 2024 and 2023, respectively
0.7 1.3 
Other comprehensive (loss) income, net of tax
(10.9)23.8 
Total Comprehensive income
$17.4 $47.4 
Earnings per common share (Note 13):
Basic$1.12 $0.87 
Diluted$1.11 $0.86 
Cash dividends declared per common share and eligible plan awards$0.28 $0.26 
See accompanying unaudited notes to the consolidated financial statements.
4


Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Loss, NetTreasury Stock at CostTotal Stockholders’ Equity
Shares IssuedAmount
(in millions, except share data)
Balance, January 1, 202458,055,968 $0.6 $419.8 $1,384.3 $(86.0)$(704.8)$1,013.9 
Stock-based obligations  1.4    1.4 
Vesting of RSUs and PSUs, net of shares withheld to satisfy tax withholdings96,824  (1.7)   (1.7)
Acquisition of common stock(1)
     (4.9)(4.9)
Dividends declared   (7.2)  (7.2)
Net income for the period—   28.3   28.3 
Change in net unrealized losses on AFS investments, net of taxes of $2.8
—    (10.9) (10.9)
Balance, March 31, 202458,152,792 $0.6 $419.5 $1,405.4 $(96.9)$(709.7)$1,018.9 
Balance, January 1, 202357,876,287 $0.6 $414.6 $1,295.6 $(138.9)$(627.7)$944.2 
Stock-based obligations  1.8    1.8 
Stock options exercised23,500  0.6    0.6 
Vesting of RSUs and PSUs, net of shares withheld to satisfy tax withholdings85,602  (1.4)   (1.4)
Acquisition of common stock(1)
     (11.4)(11.4)
Dividends declared   (7.1)  (7.1)
Net income for the period
—   23.6   23.6 
Change in net unrealized losses on AFS investments, net of taxes of $(6.3)
—    23.8  23.8 
Balance, March 31, 202357,985,389 $0.6 $415.6 $1,312.1 $(115.1)$(639.1)$974.1 
(1) Beginning January 1, 2023, amount includes applicable excise tax as imposed by the Inflation Reduction Act of 2022 (See Note 7).
See accompanying unaudited notes to the consolidated financial statements.
5


Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in millions)
 Three Months Ended
 March 31,
 20242023
Operating activities(unaudited)
Net income$28.3 $23.6 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization1.0 1.1 
Stock-based compensation1.5 1.8 
Amortization of cloud computing arrangements2.8 4.3 
Amortization of premium on investments, net(0.3)0.8 
Allowance for expected credit losses1.8 1.2 
Deferred income tax (benefit) expense
4.1 2.8 
Net realized and unrealized gains on investments
(11.4)(6.4)
Change in operating assets and liabilities:  
Premiums receivable(22.8)(21.4)
Reinsurance recoverable on paid and unpaid losses4.0 4.7 
Cloud computing arrangements (1.4)
Operating lease right-of-use assets0.4 0.7 
Current federal income taxes2.5 2.6 
Unpaid losses and loss adjustment expenses(10.0)(7.0)
Unearned premiums22.6 20.4 
Accounts payable, accrued expenses and other liabilities(3.6)(6.4)
Deferred reinsurance gain—LPT Agreement(2.0)(2.0)
Contingent commission receivable—LPT Agreement(0.2) 
Operating lease liabilities(0.4)(0.8)
Non-cancellable obligations(2.9)(2.6)
Other(14.8)(11.7)
Net cash provided by operating activities
0.6 4.3 
Investing activities  
Purchases of fixed maturity securities(169.0)(106.7)
Purchases of equity securities(5.8)(12.3)
Purchases of short-term investments(17.7)(10.5)
Purchases of other invested assets(6.4)(11.5)
Proceeds from sale of fixed maturity securities32.0 44.8 
Proceeds from sale of equity securities5.5 12.0 
Proceeds from maturities and redemptions of fixed maturity securities45.0 27.5 
Proceeds from maturities of short-term investments12.7 71.0 
Net change in unsettled investment purchases and sales7.3 (1.0)
Capital expenditures and other(1.3)(0.5)
Net cash (used in) provided by investing activities
(97.7)12.8 
Financing activities  
Acquisition of common stock(5.6)(11.1)
Cash transactions related to stock-based compensation(1.7)(0.8)
Dividends paid to stockholders(7.8)(7.6)
Payments on finance leases (0.1)
Net cash used in financing activities
(15.1)(19.6)
Net decrease in cash, cash equivalents and restricted cash
(112.2)(2.5)
Cash, cash equivalents and restricted cash at the beginning of the period226.6 89.4 
Cash, cash equivalents and restricted cash at the end of the period$114.4 $86.9 

6


The following table presents our cash, cash equivalents and restricted cash by category within the Consolidated Balance Sheets:
As ofAs of
March 31,
2024
December 31,
2023
(unaudited)
(in millions)
Cash and cash equivalents$114.2 $226.4 
Restricted cash and cash equivalents supporting reinsurance obligations0.2 0.2 
Total cash, cash equivalents and restricted cash$114.4 $226.6 

See accompanying unaudited notes to the consolidated financial statements.
7


Employers Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 (Unaudited)
1. 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), Employers Assurance Company (EAC), and Cerity Insurance Company (CIC), 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: (i) all claims under the covered policies have closed; (ii) the LPT Agreement is commuted or terminated, upon the mutual agreement of the parties; or (iii) 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 9).
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 also entitled to receive a contingent profit commission under the LPT Agreement through June 30, 2024. 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 Contingent Commission receivable at March 31, 2024 was $14.4 million.
The accompanying consolidated financial statements have been prepared in accordance with United States (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 (Exchange Act), 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, 2023 (Annual Report).
The Company operates as a single operating segment, Insurance Operations, 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 (CODM) to make decisions about resources to be allocated to the segment and assess its performance based on discrete financial information. Prior to December 31, 2023, the Company operated through two reportable segments: Employers and Cerity. All periods prior to December 31, 2023 have been conformed to the current presentation. Detailed financial information about the Company's single operating segment is presented in Note 14.
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.

8


2. New Accounting Standards
Recently Issued Accounting Standards
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this update improve disclosures about reportable segments and provide more detailed information about a reportable segment's expenses. Specifically, the amendments in this update include disclosures on an annual and interim basis, significant segment expenses that are regularly provided to the CODM, an amount for other segment items by reportable segment and a description on their composition, all annual disclosures about a reportable segment's profit or loss and assets to be required on an interim basis, the measures the CODM uses in assessing performance and allocating resources, and the title and position of the CODM. Additionally, a single reporting segment is subject to all disclosures in this amendment along with existing segment disclosures within Topic 280. This update is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company will adopt this standard when it becomes effective.
Recently Adopted Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). This update requires public business entities to annually disclose specific categories within the income tax rate reconciliation, and provide additional information for reconciling items that meet a certain quantitative threshold. Additionally, the amendments in this update require entities to disclose certain information about income taxes paid, income tax disaggregation, disclosures around unrecognized tax benefits, and the removal of disclosures related to temporary differences surrounding deferred tax liabilities to enhance the transparency and decision usefulness of income tax disclosures. This update is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted for financial statements that have not been issued. The Company elected to early adopt this update as of December 31, 2023, and the impact of this standard was not material to its consolidated financial condition or results of operations.
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848). This update provided optional transition guidance to ease the potential accounting burden associated with transitioning away from the London Interbank Offered Rate (LIBOR), with optional expedients and exceptions related to the application of US GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. Companies can elect to adopt this ASU through December 31, 2024. The Company determined that there was no impact of LIBOR transitioning on its existing contracts and investments.
3. Valuation of Financial Instruments
Financial Instruments Carried at Fair Value
The carrying value and the estimated fair value of the Company’s financial instruments at fair value were as follows:
March 31, 2024December 31, 2023
 Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
 (in millions)
Financial assets  
Total investments at fair value$2,276.3 $2,276.3 $2,180.6 $2,180.6 
Cash and cash equivalents114.2 114.2 226.4 226.4 
Restricted cash and cash equivalents0.2 0.2 0.2 0.2 
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:
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.
The Company uses third party pricing services to assist 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
9


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 to the valuation methodology utilized by third party pricing services as of March 31, 2024 and December 31, 2023.
These methods of valuation only produce an estimate of fair value if there is objectively verifiable information to produce a valuation. If objectively verifiable information is not available, the Company would be required to produce an estimate of fair value using some of the same methodologies, making assumptions for market-based inputs that are unavailable.
As of March 31, 2024, the Company held $47.5 million of fixed maturity securities at fair value that were designated Level 3. These private placement securities were designated as Level 3 securities due to the limited amount of observable market information available.
The following table presents the Company’s investments at fair value and the corresponding fair value measurements.
March 31, 2024December 31, 2023
Level 1Level 2Level 3Level 1Level 2Level 3
(in millions)
Fixed maturity securities:
U.S. Treasuries$ $63.0 $ $ $58.4 $ 
U.S. Agencies 2.1   2.1  
States and municipalities 199.8   210.2  
Corporate securities 905.5 34.0  863.7 32.1 
Residential mortgage-backed securities
 370.0   362.2  
Commercial mortgage-backed securities
 63.2   63.8  
Asset-backed securities 163.2 13.5  113.9 14.1 
Collateralized loan obligations 72.8   91.5  
Foreign government securities 10.0   10.4  
Other securities
 116.7   113.9  
Total fixed maturity securities$ $1,966.3 $47.5 $ $1,890.1 $46.2 
Equity securities at fair value:
Industrial and miscellaneous$195.3 $ $ $181.7 $ $ 
Other29.0   29.5   
Total equity securities at fair value$224.3 $ $ $211.2 $ $ 
Short-term investments$16.5 $21.7 $ $17.6 $15.5 $ 
Total investments at fair value$240.8 $1,988.0 $47.5 $228.8 $1,905.6 $46.2 
Financial Instruments Carried at Cost
All of the Company's insurance subsidiaries are members of the Federal Home Loan Bank of San Francisco (FHLB). Members are required to purchase stock in the FHLB in addition to maintaining collateral deposits that back any funds advanced and standby letters of credit issued (See Note 10). The Company’s investment in FHLB stock is recorded at cost, which approximates fair value, 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 estimated ultimate recovery of par value.
10


Financial Instruments Carried at Net Asset Value
The Company has investments in private equity limited partnership interests that are included in Other invested assets on the Company’s Consolidated Balance Sheets. These investments do not have readily determinable fair values and are carried at net asset value (NAV) and therefore are excluded from the fair value hierarchy. The Company initially estimates the value of these investments using the transaction price. In subsequent periods, the Company measures these investments using NAV per share provided quarterly by the general partner, based on financial statements that are audited annually. These investments are generally not redeemable by the investees and cannot be sold without approval of the general partner. These investments have a fund term of 3 to 12 years, subject to two or three one-year extensions at the general partner’s discretion. The Company will receive distributions of proceeds from dividends and interest from fund investments, as well as from the disposition of a fund investment, or a portion thereof. The Company expects these distributions from time-to-time during the full course of the fund term. As of March 31, 2024, the Company had unfunded commitments to these private equity limited partnerships totaling $19.0 million.
Additionally, certain cash equivalents, principally money market securities, are measured using NAV, which approximates fair value.
The following table presents cash and investments carried at NAV on the Company’s Consolidated Balance Sheets.
March 31, 2024December 31, 2023
(in millions)
Cash equivalents carried at NAV$104.3 $197.2 
Other invested assets carried at NAV97.6 91.5 
The following table provides a reconciliation of the beginning and ending balances that are measured using Level 3 inputs.
Three Months Ended
March 31,
20242023
(in millions)
Balance at the beginning of the year
$46.2 $24.2 
Purchases1.5 1.5 
Unrealized (losses) gains included in comprehensive (loss) income
(0.2)0.2 
Balance at end of period
$47.5 $25.9 
11


4. Investments
The amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the Company’s available-for-sale (AFS) investments were as follows:
Amortized
Cost
Allowance for Current Expected Credit LossesGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
(in millions)
At March 31, 2024
Fixed maturity securities
U.S. Treasuries$65.6 $ $0.3 $(2.9)$63.0 
U.S. Agencies2.2   (0.1)2.1 
States and municipalities202.8  2.4 (5.4)199.8 
Corporate securities1,003.5 (2.2)5.4 (67.2)939.5 
Residential mortgage-backed securities413.0  0.6 (43.6)370.0 
Commercial mortgage-backed securities69.7 (0.3) (6.2)63.2 
Asset-backed securities180.3  1.1 (4.7)176.7 
Collateralized loan obligations73.0   (0.2)72.8 
Foreign government securities12.7   (2.7)10.0 
Other securities(1)
116.9 (0.7)0.9 (0.4)116.7 
Total fixed maturity securities$2,139.7 $(3.2)$10.7 $(133.4)$2,013.8 
Short-term investments38.2    38.2 
Total AFS investments$2,177.9 $(3.2)$10.7 $(133.4)$2,052.0 
At December 31, 2023
Fixed maturity securities
U.S. Treasuries$60.3 $ $0.6 $(2.5)$58.4 
U.S. Agencies2.2   (0.1)2.1 
States and municipalities212.3  3.1 (5.2)210.2 
Corporate securities952.8 (2.1)8.3 (63.2)895.8 
Residential mortgage-backed securities399.3  0.9 (38.0)362.2 
Commercial mortgage-backed securities70.2   (6.4)63.8 
Asset-backed securities131.8  1.0 (4.8)128.0 
Collateralized loan obligations92.2   (0.7)91.5 
Foreign government securities12.7   (2.3)10.4 
Other securities(1)
114.2 (0.6)1.0 (0.7)113.9 
Total fixed maturity securities$2,048.0 $(2.7)$14.9 $(123.9)$1,936.3 
Short-term investments33.1    33.1 
Total AFS investments$2,081.1 $(2.7)$14.9 $(123.9)$1,969.4 
(1)Other securities within fixed maturity securities consist of bank loans, which are classified as AFS and reported at fair value.
The cost and estimated fair value of the Company’s equity securities recorded at fair value at March 31, 2024 and December 31, 2023 were as follows:
CostEstimated Fair Value
(in millions)
At March 31, 2024
Equity securities at fair value
Industrial and miscellaneous$105.1 $195.3 
Other20.8 29.0 
Total equity securities at fair value$125.9 $224.3 
12


At December 31, 2023
Equity securities at fair value
Industrial and miscellaneous$104.4 $181.7 
Other21.5 29.5 
Total equity securities at fair value$125.9 $211.2 
The Company had Other invested assets totaling $97.6 million and $91.5 million (initial cost of $88.9 million and $82.5 million) at March 31, 2024 and December 31, 2023, respectively, consisting of private equity limited partnerships, which are carried at NAV based on information provided by the general partner. These investments are non-redeemable until conversion and are periodically evaluated by the Company for impairment based on the ultimate recovery of the investment. Changes in the value of these investments are recorded through Net realized and unrealized gains (losses) on the Company’s Consolidated Statements of Comprehensive Income (Loss).
The amortized cost and estimated fair value of the Company’s fixed maturity securities at March 31, 2024, 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.
Amortized CostEstimated Fair Value
(in millions)
Due in one year or less$20.6 $20.3 
Due after one year through five years651.8 630.3 
Due after five years through ten years642.6 599.2 
Due after ten years88.7 81.3 
Mortgage and asset-backed securities736.0 682.7 
Total$2,139.7 $2,013.8 
13


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 in each case as of March 31, 2024 and December 31, 2023.
March 31, 2024December 31, 2023
Estimated Fair ValueGross
Unrealized
Losses
Number of IssuesEstimated Fair ValueGross
Unrealized
Losses
Number of Issues
(dollars in millions)
Less than 12 months:
Fixed maturity securities
U.S. Treasuries$19.0 $(0.3)8 $11.9 $(0.1)5 
States and municipalities42.2 (0.7)16 39.5 (0.3)15 
Corporate securities60.2 (0.6)23 26.1 (0.8)13 
Residential mortgage-backed securities
21.5 (0.3)20 15.8 (0.2)15 
Asset-backed securities55.1 (0.2)24 24.0 (0.1)15 
Collateralized loan obligations32.6 (0.1)8    
Other securities
14.9 (0.2)81 12.6 (0.1)70 
Total fixed maturity securities245.5 (2.4)180 129.9 (1.6)133 
Total less than 12 months$245.5 $(2.4)180 $129.9 $(1.6)133 
12 months or greater:
Fixed maturity securities
U.S. Treasuries$23.5 $(2.6)7 $23.7 $(2.4)7 
U.S. Agencies
2.2 (0.1)1 2.2 (0.1)1 
States and municipalities71.9 (4.7)33 73.5 (4.9)32 
Corporate securities695.6 (66.6)328 684.5 (62.4)331 
Residential mortgage-backed securities
301.7 (43.3)230 306.6 (37.8)228 
Commercial mortgage-backed securities
52.4 (6.2)24 53.0 (6.4)24 
Asset-backed securities46.6 (4.5)30 47.0 (4.7)29 
Collateralized loan obligations7.4 (0.1)4 80.5 (0.7)21 
Foreign government securities10.0 (2.7)2 10.4 (2.3)2 
Other securities7.1 (0.2)42 10.2 (0.6)58 
Total fixed maturity securities1,218.4 (131.0)701 1,291.6 (122.3)733 
Total 12 months or greater$1,218.4 $(131.0)701 $1,291.6 $(122.3)733 
As of March 31, 2024 and December 31, 2023, the Company had an allowance for current expected credit losses (CECL) on AFS debt securities of $3.2 million and $2.7 million, respectively (See Note 5). Those fixed maturity securities whose total fair value was less than amortized cost at each of March 31, 2024 and December 31, 2023, were those in which the Company had no intent, need or requirement to sell at an amount less than their amortized 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 and other invested assets) 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 or for unfavorable changes in CECL. Reversals of previously recognized realized losses on fixed maturity securities can also result when securities are written up for favorable changes in CECL.
14


Net realized gains and losses on investments and the change in unrealized gains and losses on the Company’s investments recorded at fair value are determined on a specific-identification basis and were as follows:
Gross Realized GainsGross Realized Losses
Net Increase
 in CECL Allowance
Change in Net Unrealized Gains (Losses)Changes in Fair Value Reflected in Earnings
Changes in Fair Value Reflected in AOCI (1), before tax
(in millions)
Three Months Ended March 31, 2024
Fixed maturity securities0.1 $(0.5)$(0.5)$(13.7)$(0.9)$(13.7)
Equity securities0.1 (0.5) 13.1 12.7  
Other invested assets   (0.4)(0.4) 
Total investments$0.2 $(1.0)$(0.5)$(1.0)$11.4 $(13.7)
Three Months Ended March 31, 2023
Fixed maturity securities$0.4 $(0.6)$(1.4)$30.1 $(1.6)$30.1 
Equity securities0.1 (1.3) 7.9 6.7  
Other invested assets   1.3 1.3  
Total investments$0.5 $(1.9)$(1.4)$39.3 $6.4 $30.1 
(1)AOCI means Accumulated other comprehensive income or loss
Proceeds from sales of fixed maturity securities were $32.0 million for the three months ended March 31, 2024, compared to $44.8 million for the three months ended March 31, 2023.
Net investment income was as follows:
Three Months Ended
March 31,
 20242023
 (in millions)
Fixed maturity securities$22.3 $23.7 
Equity securities1.6 1.8 
Other invested assets1.1 0.9 
Short-term investments0.5 1.2 
Cash equivalents and restricted cash2.3 0.9 
Gross investment income27.8 28.5 
Investment expenses(1.0)(0.9)
Net investment income$26.8 $27.6 
The Company is required by various state laws and regulations to support, through securities on deposit or otherwise, its outstanding loss reserves in 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 March 31, 2024 and December 31, 2023, securities having a fair value of $760.6 million and $748.1 million, respectively, were on deposit. Additionally, standby letters of credit from the FHLB were in place in lieu of $70.0 million of securities on deposit as of both March 31, 2024 and December 31, 2023 (See Note 10).
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 both March 31, 2024 and December 31, 2023 was $3.0 million.
5. Current Expected Credit Losses
Premiums Receivable
Premiums receivable balances are all due within one year. The Company currently determines the allowance for premiums receivable based on an internal aging schedule using collectability and historical payment patterns, as well as current and expected future market conditions to determine the appropriateness of the allowance. Historical payment patterns and future market conditions provide the basis for the estimation along with similar risk characteristics and the Company's business strategy, which have not changed significantly over time. Changes in the allowance for CECL are recorded through underwriting and general and administrative expenses.
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The table below shows the changes in CECL on premiums receivable.
Three Months Ended
March 31,
20242023
(in millions)
Beginning balance of CECL on premiums receivable$17.9 $12.8 
Net change in CECL provision5.9 3.3 
Write-offs charged against CECL(1.9)(0.7)
Recoveries collected(2.2)(1.4)
Ending balance of CECL on premiums receivable$19.7 $14.0 
Reinsurance Recoverable
In assessing an allowance for reinsurance assets, which includes reinsurance recoverables and contingent commission receivables, the Company considers historical information, financial strength of reinsurers, collateralization amounts, and ratings to determine the appropriateness of the allowance. Historically, the Company has not experienced a credit loss from reinsurance transactions. In assessing future default, the Company evaluated the CECL allowance under the ratings-based method using the A.M. Best's Average Cumulative Net Impairment Rates. Reinsurer ratings are also assessed through this process. Changes in the allowance for CECL are recorded through underwriting and general and administrative expenses.
The table below shows the changes in CECL on reinsurance recoverables.
Three Months Ended
March 31,
20242023
(in millions)
Beginning balance of CECL on reinsurance recoverables$0.9 $0.9 
Net change in CECL provision  
Ending balance of CECL on reinsurance recoverables$0.9 $0.9 
Investments
The Company assesses all AFS debt securities in an unrealized loss position for CECL. The Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria is met, the security's amortized cost basis is written down to its fair value. For AFS debt securities that do not meet either criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. Any impairment that has not been recorded through an allowance for credit losses is recognized in Accumulated other comprehensive loss on the Company's Consolidated Balance Sheets. Changes in the allowance for CECL are recorded through realized capital losses.
As of March 31, 2024, the Company established an aggregate allowance for CECL in the amount of $3.2 million. For the Company’s investments in fixed maturity debt securities, the allowance for CECL was determined by: (i) observing the credit characteristics of those debt securities that may have demonstrated a credit loss as of that date and by comparing the present value of cash flows expected to be collected to its amortized cost basis; and (ii) observing the credit characteristics of those debt securities that are expected to demonstrate a credit loss in the future by comparing the present value of cash flows expected to be collected to its amortized cost basis. The expected present value of cash flows are calculated using scenario based credit loss models derived from the discounted cash flows under the Comprehensive Capital Analysis Review framework, which is adopted by the Federal Reserve.
As of March 31, 2024, the Company did not intend to sell any of its AFS debt securities in which its amortized cost exceeded its fair value.
Accrued interest receivable on AFS debt securities totaled $16.5 million at March 31, 2024 and is excluded from the estimate of credit losses based on historically timely payments.
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The table below shows the changes in the allowance for CECL on AFS securities.
Three Months Ended
March 31,
20242023
(in millions)
Beginning balance of CECL on AFS securities$2.7 $4.5 
Net change in CECL provision0.6 2.0 
Reductions in allowance from disposals(0.1)(0.2)
Recoveries of amounts previously written off (0.4)
Ending balance of CECL on AFS securities$3.2 $5.9 
6. Property and Equipment
Property and equipment consists of the following:
As of March 31,As of December 31,
20242023
(in millions)
Furniture and equipment$1.8 $1.8 
Leasehold improvements0.5 0.5 
Computers and software42.2 45.7 
Automobiles0.6 0.6 
Property and equipment, gross45.1 48.6 
Accumulated depreciation(38.5)(42.1)
Property and equipment, net$6.6 $6.5 
Depreciation expenses related to property and equipment for the three months ended March 31, 2024 were $1.0 million and $4.8 million for the year ended December 31, 2023. Internally developed software costs that were capitalized were $0.6 million during the three months ended March 31, 2024 and $1.8 million during the year ended December 31, 2023.
Cloud Computing Arrangements
The Company’s capitalized costs associated with cloud computing arrangements totaled $25.2 million and $28.0 million, which were comprised of service contract fees and implementation costs associated with hosting arrangements as of March 31, 2024 and December 31, 2023, respectively. Total amortization for hosting arrangements was $2.8 million for the three months ended March 31, 2024 and $16.7 million for the year ended December 31, 2023.
Leases
The Company determines if an arrangement is a lease at the inception of the transaction. Operating leases for offices are presented as a right-of-use asset (ROU asset) and lease liability on the Company’s Consolidated Balance Sheets. Financing leases for automobiles are included in property and equipment and other liabilities on the Company’s Consolidated Balance Sheets.
ROU assets represent the right to use an underlying asset for the lease term and the lease liability represents the obligation to make lease payments arising from the lease transaction. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. The Company uses collateralized incremental borrowing rates to determine the present value of lease payments. The ROU assets also include lease payments less any lease incentives within a lease agreement. The Company’s lease terms may include options to extend or terminate a lease. Lease expense for lease payments is recognized on a straight-line basis over the lease term. As of March 31, 2024, the Company’s operating leases have remaining terms of one year to five years, with options to extend up to five years with no termination provision. The Company’s finance leases have an option to terminate after one year.
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Components of lease expense were as follows:
Three Months Ended
March 31,
20242023
(in millions)
Operating lease expense$0.3 $0.6 
Finance lease expense 0.1 
Total lease expense$0.3 $0.7 
As of March 31, 2024, the weighted average remaining lease term for operating leases was 3.8 years and for finance leases was 1.7 years. The weighted average discount rate was 1.3% and 7.4% for operating and finance leases, respectively.
Maturities of lease liabilities were as follows:
As of March 31, 2024
Operating LeasesFinance Leases
(in millions)
2024$1.3 $0.1 
20251.5 0.1 
20261.2  
20271.2  
2028
0.4  
Thereafter  
Total lease payments5.6 0.2 
Less: imputed interest(0.1) 
Total$5.5 $0.2 
Supplemental balance sheet information related to leases was as follows:
As of March 31,As of December 31,
20242023
(in millions)
Operating leases:
Operating lease right-of-use asset$4.7 $5.1 
Operating lease liability5.5 5.9 
Finance leases:
Property and equipment, gross0.6 0.6 
Accumulated depreciation(0.4)(0.4)
Property and equipment, net0.2 0.2 
Other liabilities$0.2 $0.2 
Supplemental cash flow information related to leases was as follows:
Three Months Ended
March 31,
20242023