UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

R☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2017~~March 31, 2024

☐ 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)


Nevada			04-3850065

~~Nevada~~ (State or other jurisdiction of incorporation or organization)		~~04-3850065~~ (I.R.S. Employer Identification Number)
				2340 Corporate Circle, Suite 200
~~10375 Professional Circle, Reno,~~ Henderson,	Nevada ~~89521~~		89074
(Address of principal executive offices and zip code)

(888) 682-6671

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

EIG

New 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 R☑ No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes R☑ No o☐

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,” ~~“non-accelerated filer,”~~ “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filerR

☑

Accelerated filero

☐

Non-accelerated filero

☐

Smaller reporting companyo

☐

Emerging growth companyo

☐

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. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No R☑

As of April 23, 2024, there were 25,343,504 shares of the registrant's common stock outstanding.



~~Class~~		~~October 19, 2017~~
~~Common Stock, $0.01 par value per share~~		~~32,430,616 shares outstanding~~

TABLE OF CONTENTS



	Page No.
PART 1 – FINANCIAL INFORMATION

Item 1		Consolidated Financial Statements
		Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2024 (Unaudited) and December 31, ~~2016~~2023	32
		Consolidated Statements of Comprehensive Income (Loss) for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 3 1 , 202 4 and ~~2016~~202 3 (Unaudited)	4
		Consolidated Statements of ~~Stockholders'~~Stockholders’ Equity for the ~~Nine~~ Three Months Ended ~~September 30, 2017~~March 3 1 , 202 4 and ~~2016~~202 3 (Unaudited)	5
		Consolidated Statements of Cash Flows for the ~~Nine~~ T hree Months Ended ~~September 30, 2017~~March 31 , 202 4 and ~~2016~~202 3 (Unaudited)	6
		Notes to Consolidated Financial Statements (Unaudited)	78
Item 2		Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations	1723
Item 3		Quantitative and Qualitative Disclosures About Market Risk	2734
Item 4		Controls and Procedures	2735

		PART II – OTHER INFORMATION

Item 1		Legal Proceedings	2837
Item 1A		Risk Factors	2837
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds	2837
Item 3		Defaults Upon Senior Securities	2837
Item 4		Mine Safety Disclosures	2837
Item 5		Other Information	2837
Item 6		Exhibits	2938

Signatures			3039

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements


Employers Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions, except share data)
	As of		As 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 investments	2,379.9		2,278.1
Cash and cash equivalents	114.2		226.4
Restricted cash and cash equivalents	0.2		0.2
Accrued investment income	16.5		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 costs	59.4		55.6

Deferred income tax asset, net	42.1		43.4
Property and equipment, net	6.6		6.5
Operating lease right-of-use assets	4.7		5.1
Intangible assets, net	13.6		13.6
Goodwill	36.2		36.2
Contingent commission receivable—LPT Agreement	14.4		14.2

Cloud computing arrangements	25.2		28.0
Other assets	39.6		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 premiums	402.3		379.7


Commissions and premium taxes payable	60.9		66.0
Accounts payable and accrued expenses	18.2		26.1


Deferred reinsurance gain—LPT Agreement	97.2		99.2


Operating lease liability	5.5		5.9
Non-cancellable obligations	14.1		17.0
Other liabilities	71.2		58.1
Total liabilities	$	2,543.9	$	2,536.5
Commitments and contingencies

Employers Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions, except share data)
As of As of
September 30,
2017 December 31,
2016
Assets (unaudited)
Available for sale:
Fixed maturity securities at fair value (amortized cost $2,360.6 at September 30, 2017 and $2,305.9 at December 31, 2016) $ 2,416.1
$ 2,344.4
Equity securities at fair value (cost $119.3 at September 30, 2017 and $116.1 at December 31, 2016) 203.2
192.2
Short-term investments at fair value (amortized cost $5.5 at September 30, 2017 and $16.0 at December 31, 2016) 5.5
16.0
Total investments 2,624.8

2,552.6
Cash and cash equivalents 69.4
67.2
Restricted cash and cash equivalents 1.1
3.6
Accrued investment income 19.3
20.6
Premiums receivable (less bad debt allowance of $9.9 at September 30, 2017 and $9.8 at December 31, 2016) 331.5
304.7
Reinsurance recoverable for:
Paid losses 7.8
8.7
Unpaid losses 553.1
580.0
Deferred policy acquisition costs 48.1
44.3
Deferred income taxes, net 42.8
59.4
Property and equipment, net 15.0
22.2
Intangible assets, net 8.0
8.2
Goodwill 36.2
36.2
Contingent commission receivable—LPT Agreement 31.1
31.1
Unsettled sales of investments 21.4
—
Other assets 25.8
34.6
Total assets $ 3,835.4
$ 3,773.4

Liabilities and stockholders’ equity

Claims and policy liabilities:

Unpaid losses and loss adjustment expenses $ 2,298.9
$ 2,301.0
Unearned premiums 331.1
310.3
Total claims and policy liabilities 2,630.0
2,611.3
Commissions and premium taxes payable 53.0
48.8
Accounts payable and accrued expenses 19.8
24.2
Deferred reinsurance gain—LPT Agreement 166.4
174.9
Notes payable 20.0
32.0
Other liabilities 29.1
41.6
Total liabilities $ 2,918.3
$ 2,932.8
Commitments and contingencies

Stockholders’ equity:

Common stock, $0.01 par value; 150,000,000 shares authorized; 56,521,284 and 56,226,277 shares issued and 32,423,929 and 32,128,922 shares outstanding at September 30, 2017 and December 31, 2016, respectively $ 0.6
$ 0.6
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued —
—
Additional paid-in capital 377.2
372.0
Retained earnings 832.4
777.2
Accumulated other comprehensive income, net of tax 90.6
74.5
Treasury stock, at cost (24,097,355 shares at September 30, 2017 and December 31, 2016) (383.7 ) (383.7 )
Total stockholders’ equity 917.1
840.6
Total liabilities and stockholders’ equity $ 3,835.4
$ 3,773.4

~~See accompanying unaudited notes to the consolidated financial statements.~~

Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017
2016
Revenues (unaudited) (unaudited)
Net premiums earned $ 187.9
$ 173.3
$ 535.0
$ 522.8
Net investment income 18.5
17.9
55.4
54.1
Net realized gains on investments 4.1
1.6
7.4
9.1
Gain on redemption of notes payable —
—
2.1
—
Other income 0.4
—
0.5
0.6
Total revenues 210.9
192.8
600.4
586.6
Expenses

Losses and loss adjustment expenses 116.9
109.0
332.0
328.0
Commission expense 23.7
21.3
66.7
63.5
Underwriting and other operating expenses 33.6
31.7
102.1
101.6
Interest expense 0.3
0.4
1.1
1.2
Other expenses 7.5

—

7.5

—
Total expenses 182.0
162.4
509.4
494.3
Net income before income taxes 28.9
30.4
91.0
92.3
Income tax expense 7.0
7.8
21.1
21.1
Net income $ 21.9
$ 22.6
$ 69.9
$ 71.2
Comprehensive income
Unrealized gains (losses) arising during the period (net of taxes of $1.6 and $(2.3)) for the three months ended September 30, 2017 and 2016, respectively, and $11.3 and $21.5 for the nine months ended September 30, 2017 and 2016, respectively) $ 3.0
$ (4.2 ) $ 20.9
$ 39.9
Reclassification adjustment for realized gains in net income (net of taxes of $1.4 and $0.6 for the three months ended September 30, 2017 and 2016, respectively, and $2.6 and $3.2 for the nine months ended September 30, 2017 and 2016, respectively) (2.7 ) (1.0 ) (4.8 )
(5.9 )
Other comprehensive income, net of tax 0.3
(5.2 ) 16.1
34.0
Total comprehensive income $ 22.2
$ 17.4
$ 86.0
$ 105.2

Net realized gains on investments
Net realized gains on investments before impairments $ 4.1
$ 1.6
$ 7.6
$ 14.4
Other than temporary impairment recognized in earnings —
—
(0.2 ) (5.3 )
Net realized gains on investments $ 4.1
$ 1.6
$ 7.4
$ 9.1

Earnings per common share (Note 12):
Basic $ 0.67
$ 0.70
$ 2.15
$ 2.19
Diluted $ 0.66
$ 0.69
$ 2.12
$ 2.16
Cash dividends declared per common share and eligible RSUs and PSUs $ 0.15
$ 0.09
$ 0.45
$ 0.27


Employers Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions, except share data)
	As of		As 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 capital	419.5		419.8
Retained earnings	1,405.4		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’ equity	1,018.9		1,013.9
Total liabilities and stockholders’ equity	$	3,562.8	$	3,550.4

See accompanying unaudited notes to the consolidated financial statements.

Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Nine Months Ended September 30, 2017 and 2016
(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, 2017 56,226,277
$ 0.6
$ 372.0
$ 777.2
$ 74.5
$ (383.7 ) $ 840.6
Stock-based obligations —
—
4.0
—
—
—
4.0
Stock options exercised 169,024
—
3.3
—
—
—
3.3
Vesting of RSUs and PSUs, net of shares withheld to satisfy minimum tax withholding 125,983
—
(2.1 ) —
—
—
(2.1 )
Dividends declared —
—
—
(14.7 ) —
—
(14.7 )
Net income for the period —
—
69.9
—
—
69.9
Change in net unrealized gains on investments, net of taxes of $8.7 —
—
—
16.1
—
16.1
Balance, September 30, 2017 56,521,284
$ 0.6
$ 377.2
$ 832.4
$ 90.6
$ (383.7 ) $ 917.1

Balance, January 1, 2016 55,589,454
$ 0.6
$ 357.2
$ 682.0
$ 83.6
$ (362.6 ) $ 760.8
Stock-based obligations —
—
4.3
—
—
—
4.3
Stock options exercised 484,829
—
7.7
—
—
—
7.7
Vesting of RSUs and PSUs, net of shares withheld to satisfy minimum tax withholding 50,691
—
(0.6 ) —
—
—
(0.6 )
Acquisition of common stock —
—
—
—
—
(18.6 ) (18.6 )
Dividends declared —
—
—
(8.7 ) —
—
(8.7 )
Net income for the period —
—
71.2
—
—
71.2
Change in net unrealized gains on investments, net of taxes of $18.3 —
—
—
34.0
—
34.0
Balance, September 30, 2016 56,124,974
$ 0.6
$ 368.6
$ 744.5
$ 117.6
$ (381.2 ) $ 850.1

~~See accompanying notes to the consolidated financial statements.~~

Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in millions)
Nine Months Ended
September 30,
2017 2016
Operating activities (unaudited)
Net income $ 69.9
$ 71.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 6.2
6.4
Stock-based compensation 3.9
4.3
Amortization of premium on investments, net 11.2
11.4
Allowance for doubtful accounts 0.1
(1.5 )
Deferred income tax expense 7.9
8.5
Net realized gains on investments (7.4 ) (9.1 )
Gain on redemption of notes payable (2.1 ) —
Write-off of previously capitalized costs 7.5
—
Change in operating assets and liabilities:

Premiums receivable (26.9 ) (14.5 )
Reinsurance recoverable on paid and unpaid losses 27.8
36.1
Current federal income taxes (5.2 ) 3.0
Unpaid losses and loss adjustment expenses (2.1 ) (17.5 )
Unearned premiums 20.8
16.7
Payables and other liabilities (9.8 ) (6.2 )
Deferred reinsurance gain—LPT Agreement (8.5 ) (11.7 )
Contingent commission receivable—LPT Agreement —
(1.9 )
Other 10.5
1.8
Net cash provided by operating activities 103.8
97.0
Investing activities

Purchase of fixed maturity securities (403.7 ) (325.2 )
Purchase of equity securities (13.8 ) (38.8 )
Purchase of short-term investments (8.2 ) (8.0 )
Proceeds from sale of fixed maturity securities 181.8
111.7
Proceeds from sale of equity securities 14.6
70.2
Proceeds from maturities and redemptions of fixed maturity securities 159.3
145.1
Proceeds from maturities of short-term investments 18.7
—
Net change in unsettled investment purchases and sales (21.4 ) —
Capital expenditures and other (7.8 ) (3.9 )
Change in restricted cash and cash equivalents 2.5
(0.2 )
Net cash used in investing activities (78.0 ) (49.1 )
Financing activities

Acquisition of common stock —
(18.6 )
Cash transactions related to stock-based compensation 1.2
7.1
Stockholder dividends paid (14.7 ) (8.8 )
Redemption of notes payable (9.9 ) —
Payments on capital leases (0.2 ) (0.1 )
Net cash used in financing activities (23.6 ) (20.4 )
Net increase in cash and cash equivalents 2.2
27.5
Cash and cash equivalents at the beginning of the period 67.2
56.6
Cash and cash equivalents at the end of the period $ 69.4
$ 84.1


Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in millions, except per share data)
	Three Months Ended
	March 31,
	2024		2023
Revenues	(unaudited)
Net premiums earned	$	184.9	$	172.7
Net investment income	26.8		27.6
Net realized and unrealized gains on investments	11.4		6.4

Other income (loss)	—		(0.2)
Total revenues	223.1		206.5
Expenses
Losses and loss adjustment expenses	116.5		107.4
Commission expense	25.5		23.4

Underwriting and general and administrative expenses	45.8		44.4
Interest and financing expenses	—		2.3

Total expenses	187.8		177.5
Net Income before income taxes	35.3		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.


Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)

	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss, Net		Treasury Stock at Cost		Total Stockholders’ Equity
	Shares Issued	Amount
	(in millions, except share data)
Balance, January 1, 2024	58,055,968	$	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 withholdings	96,824	—		(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, 2024	58,152,792	$	0.6	$	419.5	$	1,405.4	$	(96.9)	$	(709.7)	$	1,018.9

Balance, January 1, 2023	57,876,287	$	0.6	$	414.6	$	1,295.6	$	(138.9)	$	(627.7)	$	944.2
Stock-based obligations	—	—		1.8		—		—		—		1.8
Stock options exercised	23,500	—		0.6		—		—		—		0.6
Vesting of RSUs and PSUs, net of shares withheld to satisfy tax withholdings	85,602	—		(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, 2023	57,985,389	$	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.


Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in millions)
	Three Months Ended
	March 31,
	2024		2023
Operating activities	(unaudited)
Net income	$	28.3	$	23.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1.0		1.1
Stock-based compensation	1.5		1.8
Amortization of cloud computing arrangements	2.8		4.3
Amortization of premium on investments, net	(0.3)		0.8
Allowance for expected credit losses	1.8		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 losses	4.0		4.7

Cloud computing arrangements	—		(1.4)
Operating lease right-of-use assets	0.4		0.7
Current federal income taxes	2.5		2.6
Unpaid losses and loss adjustment expenses	(10.0)		(7.0)
Unearned premiums	22.6		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 securities	32.0		44.8
Proceeds from sale of equity securities	5.5		12.0
Proceeds from maturities and redemptions of fixed maturity securities	45.0		27.5
Proceeds from maturities of short-term investments	12.7		71.0
Net change in unsettled investment purchases and sales	7.3		(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 period	226.6		89.4
Cash, cash equivalents and restricted cash at the end of the period	$	114.4	$	86.9

The following table presents our cash, cash equivalents and restricted cash by category within the Consolidated Balance Sheets:


	As of		As 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 obligations	0.2		0.2
Total cash, cash equivalents and restricted cash	$	114.4	$	226.6

See accompanying unaudited notes to the consolidated financial statements.

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), ~~and~~ Employers Assurance Company (EAC), and Cerity Insurance Company (CIC), EHI is engaged in the commercial property and casualty insurance industry, specializing in ~~workers'~~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~~until: (i) all claims under the covered policies have ~~closed,~~closed; (ii) the LPT Agreement is commuted or terminated, upon the mutual agreement of the ~~parties,~~parties; or (iii) the ~~reinsurers'~~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~~Fund’s rights and obligations associated with the LPT ~~Agreement. See~~Agreement (See Note 8.9).

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.~~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 inon the ~~accompanying~~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 ~~U.S.~~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, ~~2016~~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~~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. ~~Currently,~~Prior to December 31, 2023, the Company ~~has one~~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 ~~workers’ compensation insurance and related services.~~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.

2. New Accounting Standards

Recently Issued Accounting Standards

In ~~January 2017,~~November 2023, the FASB issued ASU ~~Number 2017-04, Intangibles-Goodwill~~2023-07, Segment Reporting (Topic 280). The amendments in this update improve disclosures about reportable segments and ~~Other (Topic 350)~~.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 simplifies the measurement of goodwill by eliminating the performance of Step 2 in the goodwill impairment testing. This update allows the testing to be performed by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge when the carrying amount exceeds fair value. Additionally, this update eliminated the requirements of any reporting unit with a zero or negative carrying value to perform Step 2, but requires disclosure of the amount of goodwill allocated to a reporting unit with zero or negative carrying amount of net assets. This update becomesis effective for fiscal years beginning after December 15, ~~2019.~~2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company ~~does not expect~~will adopt this ~~update to have a material impact to its consolidated financial condition and results of operations.~~standard when it becomes effective.

Recently Adopted Accounting Standards

In ~~March 2017,~~December 2023, the FASB issued ASU ~~Number 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20)~~2023-09, Income Taxes (Topic 740). This update ~~shortens~~requires public business entities to annually disclose specific categories within the ~~amortization period on callable debt securities held at~~income tax rate reconciliation, and provide additional information for reconciling items that meet a ~~premium~~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 ~~earliest call date, which now~~

~~closely aligns~~removal of disclosures related to temporary differences surrounding deferred tax liabilities to enhance the ~~amortization period~~transparency and decision usefulness of ~~premiums and discounts to expectations incorporated in the market pricing on callable debt securities.~~income tax disclosures. This update ~~becomes~~is effective for fiscal years beginning after December 15, ~~2018 and interim periods within those fiscal years,~~2024 and early adoption is ~~permitted.~~permitted for financial statements that have not been issued. The Company ~~does not expect that adoption~~elected to early adopt this update as of December 31, 2023, and the impact of this standard ~~will have a~~was not material ~~impact on~~to its consolidated financial condition ~~and~~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. ~~Fair Value~~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:


	September 30, 2017					December 31, 2016
			March 31, 2024									March 31, 2024			December 31, 2023
	Carrying Value			Estimated Fair Value		Carrying Value		Estimated Fair Value		Carrying Value	Estimated Fair Value		Carrying Value	Estimated Fair Value
	(in millions)									(in millions)
Financial assets
Investments	$	2,624.8		$	2,624.8	$	2,552.6	$	2,552.6
Total investments at fair value
Total investments at fair value
Total investments at fair value
Cash and cash equivalents	69.4			69.4		67.2		67.2
Restricted cash and cash equivalents	1.1			1.1		3.6		3.6
Financial liabilities
Notes payable	$	20.0		$	23.0	$	32.0	$	33.0

Assets and liabilities recorded at fair value on the ~~Company's~~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~~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

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~~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 ~~prices obtained from~~the valuation methodology utilized by third party pricing services as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 that were material to the consolidated financial statements.~~2023.

These methods of valuation ~~will~~ 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.

~~The Company's estimates~~As ofMarch 31, 2024, the Company held $47.5 million of fixed maturity securities at fair value ~~for its financial liabilities are based on a combination~~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 ~~variable interest rates for notes with similar durations to discount the projection of future payments on notes payable. The~~Company’s investments at fair value ~~measurements for notes payable have been determined to be Level 2~~and the corresponding fair value measurements.


	March 31, 2024						December 31, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 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	$	—	$	—

Other	29.0		—		—		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 ~~each of the periods presented.~~Cost

~~Each~~All of the Company's insurance ~~operating~~ subsidiaries ~~is a member~~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. Investment~~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. ~~Due to~~

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 ~~nature of FHLB stock, its carrying~~Company’s Consolidated Balance Sheets. These investments do not have readily determinable fair values and are carried at net asset value ~~approximates~~(NAV) and therefore are excluded from the fair value ~~and was determined~~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 ~~Company to~~general partner, based on financial statements that are audited annually. These investments are generally not redeemable by the investees and cannot be ~~Level 3 at each~~sold without approval of the ~~periods presented.~~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.

~~The following table presents the items in the Company's Consolidated Balance Sheets that are stated at fair value and the corresponding fair value measurements.~~

September 30, 2017 December 31, 2016
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
(in millions)
Fixed maturity securities
U.S. Treasuries $ —
$ 132.6
$ —
$ —
$ 127.4
$ —
U.S. Agencies —
13.4
—
—
12.8
—
States and municipalities —
700.4
—
—
851.6
—
Corporate securities —
1,060.3
—
—
956.7
—
Residential mortgage-backed securities —
363.2
—
—
258.0
—
Commercial mortgage-backed securities —
91.6
—
—
95.5
—
Asset-backed securities —
54.6
—
—
35.4
7.0
Total fixed maturity securities $ —
$ 2,416.1
$ —
$ —
$ 2,337.4
$ 7.0
Equity securities
Industrial and miscellaneous $ 175.6
$ —
$ —
$ 167.2
$ —
$ —
Non-redeemable preferred (FHLB stock) —
—
4.7
—
—
4.9
Other 22.9
—
—
20.1
—
—
Total equity securities $ 198.5
$ —
$ 4.7
$ 187.3
$ —
$ 4.9
Short-term investments $ —
$ 5.5
$ —
$ —
$ 16.0
$ —

~~Certain~~Additionally, certain cash equivalents, principally money market securities, are measured atusing NAV, which approximates fair ~~value using the net asset value (NAV) per share.~~ value.

The following table presents cash ~~equivalents~~and investments carried at NAV ~~and total cash and cash equivalents carried at fair value~~ on the ~~Company's~~Company’s Consolidated Balance Sheets.

September 30, 2017 December 31, 2016
(in millions)
Cash and cash equivalents at fair value $ 30.4
$ 9.7
Cash equivalents measured at NAV, which approximates fair value 39.0
57.5
Total cash and cash equivalents $ 69.4
$ 67.2


	March 31, 2024		December 31, 2023
	(in millions)
Cash equivalents carried at NAV	$	104.3	$	197.2
Other invested assets carried at NAV	97.6		91.5

The following table provides a reconciliation of the beginning and ending balances that are measured using Level 3 ~~inputs for the nine months ended September 30, 2017 and 2016.~~inputs.


	Three Months Ended
	March 31,
	2024		2023
	(in millions)
Balance at the beginning of the year	$	46.2	$	24.2
Purchases	1.5		1.5
Unrealized (losses) gains included in comprehensive (loss) income	(0.2)		0.2
Balance at end of period	$	47.5	$	25.9

Level 3 Securities
2017 2016
(in millions)
Beginning balance, January 1 $ 11.9
$ —
Transfers (out) of Level 3 ⁽¹⁾
(7.0 ) —
Purchases and sales, net (0.2 ) 4.9
Ending balance, September 30 $ 4.7
$ 4.9


~~(1)~~	~~Transferred from Level 3 to Level 2 because observable market data became available for the securities.~~

4. Investments

The ~~cost or~~ amortized cost, gross unrealized gains, gross unrealized losses, and estimated fair value of the Company’s available-for-sale (AFS) investments were as follows:


	Cost or Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in millions)
At September 30, 2017
			Amortized Cost								Amortized Cost	Allowance for Current Expected Credit Losses	Gross Unrealized Gains		Gross Unrealized Losses	Estimated Fair Value
			(in millions)											(in millions)
At March 31, 2024
Fixed maturity securities
Fixed maturity securities
Fixed maturity securities
U.S. Treasuries
U.S. Treasuries
U.S. Treasuries	$	130.3		$	2.5	$	(0.2	)	$	132.6
U.S. Agencies	12.8			0.6		—			13.4
States and municipalities	671.0			30.7		(1.3		)	700.4
Corporate securities	1,040.3			22.0		(2.0		)	1,060.3
Residential mortgage-backed securities	360.1			4.8		(1.7		)	363.2
Commercial mortgage-backed securities	91.7			0.5		(0.6		)	91.6
Asset-backed securities	54.4			0.3		(0.1		)	54.6
Collateralized loan obligations
Foreign government securities
Other securities(1)
Total fixed maturity securities	2,360.6			61.4		(5.9		)	2,416.1
Equity securities
Industrial and miscellaneous	102.8			76.4		(3.6		)	175.6
Non-redeemable preferred (FHLB stock)	4.7			—		—			4.7
Other	11.8			11.1		—			22.9
Total equity securities	119.3			87.5		(3.6		)	203.2
Short-term investments	5.5			—		—			5.5
Total investments	$	2,485.4		$	148.9	$	(9.5	)	$	2,624.8
Total AFS investments


At December 31, 2016
At December 31, 2023
Fixed maturity securities
Fixed maturity securities
Fixed maturity securities
U.S. Treasuries
U.S. Treasuries
U.S. Treasuries	$	124.1	$	3.5	$	(0.2	)	$	127.4
U.S. Agencies	11.9		0.9		—			12.8
States and municipalities	833.0		24.7		(6.1		)	851.6
Corporate securities	942.3		18.9		(4.5		)	956.7
Residential mortgage-backed securities	255.9		4.7		(2.6		)	258.0
Commercial mortgage-backed securities	96.1		0.4		(1.0		)	95.5
Asset-backed securities	42.6		—		(0.2		)	42.4
Collateralized loan obligations
Foreign government securities
Other securities(1)
Total fixed maturity securities	2,305.9		53.1		(14.6		)	2,344.4
Equity securities
Industrial and miscellaneous	100.5		67.4		(0.7		)	167.2
Non-redeemable preferred (FHLB stock)	4.9		—		—			4.9
Other	10.7		9.4		—			20.1
Total equity securities	116.1		76.8		(0.7		)	192.2
Short-term investments	16.0		—		—			16.0
Total investments	$	2,438.0	$	129.9	$	(15.3	)	$	2,552.6
Total AFS investments

(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:


	Cost		Estimated Fair Value
	(in millions)
At March 31, 2024
Equity securities at fair value
Industrial and miscellaneous	$	105.1	$	195.3
Other	20.8		29.0
Total equity securities at fair value	$	125.9	$	224.3




At December 31, 2023
Equity securities at fair value
Industrial and miscellaneous	$	104.4	$	181.7
Other	21.5		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~~Company’s fixed maturity securities at ~~September 30, 2017~~,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 Cost		Estimated Fair Value
	(in millions)
Due in one year or less	$	20.6	$	20.3
Due after one year through five years	651.8		630.3
Due after five years through ten years	642.6		599.2
Due after ten years	88.7		81.3
Mortgage and asset-backed securities	736.0		682.7
Total	$	2,139.7	$	2,013.8

Amortized Cost Estimated Fair Value
(in millions)
Due in one year or less $ 260.8
$ 262.2
Due after one year through five years 715.3
737.1
Due after five years through ten years 692.5
713.7
Due after ten years 185.8
193.7
Mortgage and asset-backed securities 506.2
509.4
Total $ 2,360.6
$ 2,416.1

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 ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016~~.2023.


	March 31, 2024					December 31, 2023
	Estimated Fair Value		Gross Unrealized Losses		Number of Issues	Estimated Fair Value		Gross 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 municipalities	42.2		(0.7)		16	39.5		(0.3)		15
Corporate securities	60.2		(0.6)		23	26.1		(0.8)		13
Residential mortgage-backed securities	21.5		(0.3)		20	15.8		(0.2)		15

Asset-backed securities	55.1		(0.2)		24	24.0		(0.1)		15
Collateralized loan obligations	32.6		(0.1)		8	—		—		—

Other securities	14.9		(0.2)		81	12.6		(0.1)		70
Total fixed maturity securities	245.5		(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 municipalities	71.9		(4.7)		33	73.5		(4.9)		32
Corporate securities	695.6		(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 securities	46.6		(4.5)		30	47.0		(4.7)		29
Collateralized loan obligations	7.4		(0.1)		4	80.5		(0.7)		21
Foreign government securities	10.0		(2.7)		2	10.4		(2.3)		2
Other securities	7.1		(0.2)		42	10.2		(0.6)		58
Total fixed maturity securities	1,218.4		(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

September 30, 2017 December 31, 2016
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 $ 64.7
$ (0.1 ) 25
$ 33.3
$ (0.2 ) 14
States and municipalities 38.9
(0.5 ) 10
200.9
(6.1 ) 50
Corporate securities 211.9
(1.6 ) 72
289.5
(4.1 ) 101
Residential mortgage-backed securities 165.1
(1.6 ) 52
137.5
(2.6 ) 51
Commercial mortgage-backed securities 35.6
(0.4 ) 13
48.0
(1.0 ) 21
Asset-backed securities 26.7
(0.1 ) 25
30.1
(0.2 ) 20
Total fixed maturity securities 542.9
(4.3 ) 197
739.3
(14.2 ) 257
Equity securities 17.5
(3.2 ) 30
13.6
(0.6 ) 28
Total less than 12 months $ 560.4
$ (7.5 ) 227
$ 752.9
$ (14.8 ) 285

12 months or greater:
Fixed maturity securities
U.S. Treasuries $ 2.9
$ (0.1 ) 1
$ —
$ —
—
States and municipalities 21.0
(0.8 ) 8
—
—
—
Corporate securities 23.5
(0.4 ) 10
15.2
(0.4 ) 5
Residential mortgage-backed securities 3.5
(0.1 ) 3
—
—
—
Commercial mortgage-backed securities 6.3
(0.2 ) 4
—
—
—
Total fixed maturity securities 57.2
(1.6 ) 26
15.2
(0.4 ) 5
Equity securities 4.0
(0.4 ) 2
1.7
(0.1 ) 5
Total 12 months or greater $ 61.2
$ (2.0 ) 28
$ 16.9
$ (0.5 ) 10

Total available-for-sale:
Fixed maturity securities
U.S. Treasuries $ 67.6
$ (0.2 ) 26
$ 33.3
$ (0.2 ) 14
States and municipalities 59.9
(1.3 ) 18
200.9
(6.1 ) 50
Corporate securities 235.4
(2.0 ) 82
304.7
(4.5 ) 106
Residential mortgage-backed securities 168.6
(1.7 ) 55
137.5
(2.6 ) 51
Commercial mortgage-backed securities 41.9
(0.6 ) 17
48.0
(1.0 ) 21
Asset-backed securities 26.7
(0.1 ) 25

30.1
(0.2 ) 20
Total fixed maturity securities 600.1
(5.9 ) 223
754.5
(14.6 ) 262
Equity securities 21.5
(3.6 ) 32
15.3
(0.7 ) 33
Total available-for-sale $ 621.6
$ (9.5 ) 255
$ 769.8
$ (15.3 ) 295

~~The~~As of March 31, 2024 and December 31, 2023, the Company ~~determined that unrealized~~had an allowance for current expected credit losses (CECL) on ~~fixed maturities for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~were primarily the result~~AFS debt securities of ~~changes in prevailing interest rates~~$3.2 million and ~~not the credit quality of the issuers. The~~$2.7 million, respectively (See Note5). Those fixed maturity securities whose total fair value was less than amortized cost at each of March 31, 2024 and December 31, 2023, were ~~not determined~~those in which the Company had no intent, need or requirement to ~~be other-than-temporarily impaired given~~sell at an amount less than their amortized cost.

Realized gains and losses on investments include the ~~lack~~gain or loss on a security at the time of ~~severity and duration of the impairment, the credit quality of the issuers, the Company’s intent~~sale compared to ~~not sell the~~its original or adjusted cost (equity securities and ~~a determination that it is not more likely than not that the Company will be required to sell the securities until fair value recovers to above~~other invested assets) or amortized cost ~~or principal value upon maturity.~~

~~The Company~~(fixed maturity securities). Realized losses on fixed maturity securities are also recognized ~~an impairment~~when securities are written down as a result of ~~$0.2 million (from one equity security) during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017. The~~an other-than-temporary impairment or for unfavorable changes in CECL. Reversals of previously recognized ~~during this period was the result of the severity and duration of the change in fair value of this equity security. Certain unrealized~~realized losses on ~~equity~~fixed maturity securities ~~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~~can also result when securities ~~until fair value recovers to above cost.~~are written up for favorable changes in CECL.

Net realized gains and losses on investments and the change in unrealized gains ~~(losses)~~and losses on ~~fixed maturity and equity securities~~the Company’s investments recorded at fair value are determined on a specific-identification basis and were as follows:


	Gross Realized Gains		Gross 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 securities	0.1		$	(0.5)	$	(0.5)	$	(13.7)	$	(0.9)	$	(13.7)
Equity securities	0.1		(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 Nine Months Ended
September 30, September 30,
2017
2016 2017
2016
(in millions)
Net realized gains on investments
Fixed maturity securities
Gross gains $ 3.5
$ —
$ 4.0
$ 1.3
Gross losses (0.7 ) —
(0.8 ) (0.5 )
Net realized gains on fixed maturity securities $ 2.8
$ —
$ 3.2
$ 0.8
Equity securities
Gross gains $ 1.3
$ 1.6
$ 4.4
$ 14.3
Gross losses —
—
(0.2 ) (6.0 )
Net realized gains on equity securities $ 1.3
$ 1.6
$ 4.2
$ 8.3
Total $ 4.1
$ 1.6
$ 7.4
$ 9.1

Change in net unrealized gains

Fixed maturity securities $ (1.9 ) $ (10.2 ) $ 17.0
$ 43.4
Equity securities 2.4
2.1
7.8
8.9
Total $ 0.5
$ (8.1 ) $ 24.8
$ 52.3


Three Months Ended March 31, 2023
Fixed maturity securities	$	0.4	$	(0.6)	$	(1.4)	$	30.1	$	(1.6)	$	30.1
Equity securities	0.1		(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,
		2024		2023
		(in millions)
Fixed maturity securities		$	22.3	$	23.7
Equity securities		1.6		1.8
Other invested assets		1.1		0.9
Short-term investments		0.5		1.2
Cash equivalents and restricted cash		2.3		0.9
Gross investment income		27.8		28.5
Investment expenses		(1.0)		(0.9)
Net investment income		$	26.8	$	27.6

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(in millions)
Fixed maturity securities $ 17.4
$ 16.9
$ 52.4
$ 50.8
Equity securities 1.7
1.7
5.2
5.4
Cash equivalents and restricted cash 0.2
0.1
0.4
0.2
Gross investment income 19.3
18.7
58.0
56.4
Investment expenses (0.8 ) (0.8 ) (2.6 ) (2.3 )
Net investment income $ 18.5
$ 17.9
$ 55.4
$ 54.1

The Company is required by various state laws and regulations to ~~hold~~support, through securities on deposit or ~~letters of credit~~otherwise, its outstanding loss reserves 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 ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, securities having a fair value of ~~$1,017.7~~$760.6 million and ~~$1,009.7~~$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~~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 ~~September 30, 2017~~both March 31, 2024 and December 31, ~~2016~~2023 was ~~$25.2~~$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.

The table below shows the changes in CECL on premiums receivable.


	Three Months Ended
	March 31,
		2024		2023
		(in millions)
Beginning balance of CECL on premiums receivable		$	17.9	$	12.8
Net change in CECL provision		5.9		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,
		2024		2023
		(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 ~~$27.2 million, respectively.~~

is excluded from the estimate of credit losses based on historically timely payments.

5.The table below shows the changes in the allowance for CECL on AFS securities.


	Three Months Ended
	March 31,
		2024		2023
		(in millions)
Beginning balance of CECL on AFS securities		$	2.7	$	4.5
Net change in CECL provision		0.6		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 March 31,		As of December 31,
	2024						2024		2023
	(in millions)							(in millions)

	As of September 30,			As of December 31,
	2017			2016
	(in millions)
Furniture and equipment
Furniture and equipment
Furniture and equipment	$	1.7		$	2.3
Leasehold improvements	2.9			4.3
Computers and software	54.5			59.0
Automobiles	1.2			1.2
Property and equipment, gross	60.3			66.8
Accumulated depreciation	(45.3		)	(44.6		)
Property and equipment, net	$	15.0		$	22.2

Depreciation expenses related to property and equipment for the ~~nine~~three months ended ~~September 30, 2017 was $6.0~~March 31, 2024 were $1.0 million and $4.8 million for the year ended December 31, ~~2016 was $8.2 million.~~2023. Internally developed software costs ofthat were capitalized were $0.6 million during the three months ended March 31, 2024 and $1.8 million ~~and $1.3 million were capitalized~~ during ~~the nine months ended September 30, 2017 and~~ the year ended December 31, ~~2016, respectively.~~2023.

~~Additionally, during the third quarter of 2017, the Company wrote-off $7.5 million of previously~~Cloud Computing Arrangements

The Company’s capitalized costs ~~relating~~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 ~~development~~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 ~~information technology capabilities that had not yet been placed in service, which~~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 ~~in Other expenses in~~on a straight-line basis over the ~~Company's Consolidated Statements~~lease term. As of ~~Comprehensive Income.~~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 incurred this charge~~Company’s finance leases have an option to terminate after one year.

Components of lease expense were as ~~part~~follows:


	Three Months Ended
	March 31,
		2024		2023
		(in millions)
Operating lease expense		$	0.3	$	0.6



Finance lease expense		—		0.1
Total lease expense		$	0.3	$	0.7

As of ~~a continual evaluation~~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 ~~its ongoing technology initiatives.~~lease liabilities were as follows:


	As of March 31, 2024
	Operating Leases		Finance Leases
	(in millions)
2024	$	1.3	$	0.1
2025	1.5		0.1
2026	1.2		—
2027	1.2		—
2028	0.4		—
Thereafter	—		—
Total lease payments	5.6		0.2
Less: imputed interest	(0.1)		—
Total	$	5.5	$	0.2

6.Supplemental balance sheet information related to leases was as follows:


	As of March 31,		As of December 31,
	2024		2023
	(in millions)
Operating leases:
Operating lease right-of-use asset	$	4.7	$	5.1
Operating lease liability	5.5		5.9
Finance leases:
Property and equipment, gross	0.6		0.6
Accumulated depreciation	(0.4)		(0.4)
Property and equipment, net	0.2		0.2
Other liabilities	$	0.2	$	0.2

Supplemental cash flow information related to leases was as follows:


	Three Months Ended
	March 31,
	2024		2023
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	0.3	$	0.6

Financing cash flows used for finance leases	—		0.1

7. Income Taxes

~~Income tax expense for interim periods is measured using an estimated~~The Company’s effective tax rate for the ~~annual period. The Company's~~three months ended March 31, 2024 was 19.8% and the Company’s effective tax rate ~~was 23.2% and 22.9%~~ for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 was 18.6%. The effective rates during each of the periods presented included income tax benefits and ~~2016, respectively. Tax-advantaged~~exclusions associated with tax-advantaged investment income, LPT ~~Reserve Adjustments, Deferred Gain amortization,~~adjustments, and ~~certain other adjustments reduced the~~deferred gain amortization.

The Inflation Reduction Act of 2022 added a new IRC section, Section 4501, that imposes a 1% excise tax on stock repurchases on publicly traded companies that occurred after December 31, 2022. The Company's ~~effective income~~excise tax ~~rate below the U.S. statutory rate of 35%.~~obligation is $0.7 million at March 31, 2024, which is included in treasury stock, on its Consolidated Balance Sheets.

7.8. Liability for Unpaid Losses and Loss Adjustment Expenses

The following table represents a reconciliation of changes in the liability for unpaid losses and LAE.


	Three Months Ended
	March 31,
	2024		2023
	(in millions)
Unpaid losses and LAE at beginning of period	$	1,884.5	$	1,960.7
Less reinsurance recoverable, excluding CECL allowance, on unpaid losses and LAE	428.4		445.4
Net unpaid losses and LAE at beginning of period	1,456.1		1,515.3
Losses and LAE, net of reinsurance, incurred during the period related to:
Current period	118.7		109.6
Prior periods	(0.1)		(0.2)
Total net losses and LAE incurred during the period	118.6		109.4
Paid losses and LAE, net of reinsurance, related to:
Current period	6.8		5.6
Prior periods	117.4		105.7
Total net paid losses and LAE during the period	124.2		111.3
Ending unpaid losses and LAE, net of reinsurance	1,450.5		1,513.4
Reinsurance recoverable, excluding CECL allowance, on unpaid losses and LAE	424.0		440.3
Unpaid losses and LAE at end of period	$	1,874.5	$	1,953.7

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(in millions)
Unpaid losses and LAE, gross of reinsurance, at beginning of period $ 2,284.9
$ 2,332.3
$ 2,301.0
$ 2,347.5
Less reinsurance recoverable, excluding bad debt allowance, on unpaid losses and LAE 559.8
598.8
580.0
628.2
Net unpaid losses and LAE at beginning of period 1,725.1
1,733.5
1,721.0
1,719.3
Losses and LAE, net of reinsurance, incurred during the period related to:

Current period 119.7
111.1
341.0
343.1
Prior periods (0.2 ) 0.8
(0.5 ) (1.5 )
Total net losses and LAE incurred during the period 119.5
111.9
340.5
341.6
Paid losses and LAE, net of reinsurance, related to:

Current period 23.5
23.7
45.2
42.8
Prior periods 75.3
83.2
270.5
279.6
Total net paid losses and LAE during the period 98.8
106.9
315.7
322.4
Ending unpaid losses and LAE, net of reinsurance 1,745.8
1,738.5
1,745.8
1,738.5
Reinsurance recoverable, excluding bad debt allowance, on unpaid losses and LAE 553.1
591.5
553.1
591.5
Unpaid losses and LAE, gross of reinsurance, at end of period $ 2,298.9
$ 2,330.0
$ 2,298.9
$ 2,330.0

Total net losses and LAE included in the above table ~~excludes the impact of the aggregate of~~exclude amortization of the deferred reinsurance gain—LPT Agreement ~~LPT Reserve Adjustments,~~ and LPT Contingent Commission Adjustments, which totaled ~~$2.5~~$2.1 million and ~~$3.0~~$2.0 million for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively ~~and $8.5 million and $13.6 million for the nine months ended September 30, 2017 and 2016, respectively (Note~~ 8)(see Note 9).

The change in incurred losses and LAE attributable to prior periods ~~was related to~~for the three months ended March 31, 2024 and 2023, included $0.1 million and $0.2 million of net favorable loss reserve development on the Company's assigned risk business, ~~for~~respectively. For each of the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2024 and 2023, the Company did not recognize any prior accident year loss reserve development on its voluntary risk business. These determinations were made in light of: (i) a full actuarial study not being performed during the periods; and (ii) the amount of indicated net prior year loss reserve development was consistent with our expectations.

8.9. LPT Agreement

The Company is party to the LPT Agreement under which ~~$1.5~~$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~~.$775.0 million. The LPT Agreement provides coverage up to ~~$2.0 billion~~.$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~~Consolidated Statements of ~~comprehensive income.~~Comprehensive Income (Loss). Any adjustments to the Deferred Gain are recorded in losses and LAE incurred in the accompanying ~~consolidated statements~~Consolidated Statements of ~~comprehensive income.~~Comprehensive Income (Loss).

The Company amortized ~~$2.5~~$1.9 million and ~~$3.0~~$2.0 million of the Deferred Gain for the three months ended ~~September 30, 2017~~March 31, 2024 and 2016, respectively, and $8.5 million and $8.7 million for the nine months ended September 30, 2017 and 2016, respectively. Additionally, the Deferred Gain was reduced by a further $3.1 million and $1.8 million for the nine months ended September 30, 2016, due to a favorable LPT Reserve Adjustment and a favorable LPT Contingent Commission Adjustment,2023, respectively. The remaining Deferred Gain was ~~$166.4~~$97.2 million and ~~$174.9~~$99.2 million as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, respectively. Additionally, the Company recognized $0.2 million of favorable LPT Contingent Commission Adjustments as of March 31, 2024. The estimated remaining liabilities subject to the LPT Agreement were ~~$445.4~~$287.1 million and ~~$465.5~~ $291.7

million as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, respectively. Losses and LAE paid with respect to the LPT Agreement totaled ~~$742.7~~$882.2 million and ~~$722.7~~$877.6 million from inception through ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, respectively.

~~9. Notes Payable~~10. Financing Arrangements

~~Notes payable is comprised~~All of the ~~following:~~

September 30, 2017 December 31, 2016
(in millions)
Dekania Surplus Note, due April 30, 2034 $ 10.0
$ 10.0
Alesco Surplus Note, due December 15, 2034 10.0
10.0
ICONS Surplus Note, due May 26, 2034 —
12.0
Balance $ 20.0
$ 32.0

~~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~~Company's insurance subsidiaries are members of the ~~note provide for quarterly interest payments~~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.

FHLB membership also allows the Company’s insurance subsidiaries access to standby letters of credit (Letter of Credit Agreements). Letter of Credit Agreements may only be used to satisfy, in whole or in part, insurance deposit requirements with the State of California and must be fully secured with eligible collateral at ~~a rate 425 basis points in excess~~all times. Letter of ~~the 90-day LIBOR. Both the payment of interest and repayment of the principal under this note and the surplus notes described in the succeeding two paragraphs~~Credit Agreements are subject to annual maintenance charges and a fee of 15 basis points on issued amounts. As of both March 31, 2024 and December 31, 2023, letters of credit totaling $70.0 million, were issued in lieu of securities on deposit with the State of California under these Letter of Credit Agreements. The Letter of Credit Agreements currently in effect expire on March 31, 2025, and will remain evergreen with automatic one-year extensions unless the FHLB notifies the beneficiary at least 60 days prior ~~approval~~to the then applicable expiration date of its election not to renew.

As of March 31, 2024 and December 31, 2023, investment securities having a fair value of $275.1 million and $286.4 million, respectively, were pledged to the FHLB by the Company’s insurance subsidiaries in support of the ~~Florida Department~~collateralized advance facility and the Letter of ~~Financial Services.~~Credit Agreements.

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.

~~EPIC had a $12.0 million surplus note to ICONS, Inc. issued as part of a pooled transaction. This note was redeemed in May 2017 for $9.9 million, resulting in a $2.1 million gain.~~

~~10.~~11. Accumulated Other Comprehensive ~~Income~~Loss

Accumulated other comprehensive ~~income~~loss is comprised of unrealized gains and losses on investments classified as ~~available-for-sale,~~AFS, net of deferred ~~tax expense.~~taxes. The following table summarizes the components of accumulated other comprehensive ~~income:~~loss:


	March 31, 2024		December 31, 2023
	(in millions)
Net unrealized losses on investments, before taxes	$	(122.6)	$	(108.9)
Deferred tax benefit on net unrealized losses	25.7		22.9
Total accumulated other comprehensive loss	$	(96.9)	$	(86.0)

September 30, 2017 December 31, 2016
(in millions)
Net unrealized gains on investments, before taxes $ 139.4
$ 114.6
Deferred tax expense on net unrealized gains (48.8 ) (40.1 )
Total accumulated other comprehensive income $ 90.6
$ 74.5

~~11.~~12. 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:


	Number Awarded	Weighted Average Fair Value on Date of Grant	Aggregate Fair Value on Date of Grant
			(in millions)
February 2024
RSUs(1)	61,280	46.36	2.8
PSUs(2)	77,360	46.36	3.6

March 2024
RSUs(1)	4,712	45.00	0.2

Number Awarded Weighted Average Fair Value on Date of Grant Weighted Average Exercise Price Aggregate Fair Value on Date of Grant
(in millions)
March 2017
RSUs⁽¹⁾
72,020
$ 37.60
$ —
$ 2.7
PSUs⁽²⁾
97,440
37.60
—
3.7

May 2017
RSUs⁽¹⁾
11,888
$ 40.35
$ —
$ 0.5

July 2017
RSUs⁽¹⁾
1,251
43.95
$ —
$ 0.1
(1)These RSUs were awarded to certain employees of the Company on two separate dates and all vest 25% on March 15, 2025 and each of the subsequent three anniversaries of that date.


~~(1)~~	~~The RSUs awarded in March 2017~~ (2)These PSUs were awarded to certain employees ~~of the Company and~~ ~~vest 25% on March 15, 2018, 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 change of control of the Company.~~

~~The RSUs awarded in May 2017 and July 2017 were awarded to non-employee Directors~~ of the Company and ~~vest on May 25, 2018.~~

~~(2)~~

~~The PSUs awarded in March 2017 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%~~have a performance period of three years. The PSU awards are subject to certain performance goals with payouts that range from 0% to 250% of the target awards. The value shown ~~in the table represents the aggregate number of PSUs awarded at the target level.~~

~~Commencing~~ in ~~2017, employees~~the table represents the aggregate number of PSUs awarded at the target level.

Employees who ~~were~~are awarded RSUs and PSUs are entitled to receive dividend equivalents for eligible awards, payable in cash, when and if, 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~~are forfeited.

~~Stock~~RSUs and PSUs 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.

As of March 31, 2024, the Company no longer had any stock options ~~exercised totaled~~ ~~169,024~~ ~~for~~outstanding. During the ~~nine~~three months ended ~~September 30, 2017, 484,829 for the nine months ended September 30, 2016,~~March 31, 2023, and ~~586,132 for~~ the year ended December 31, ~~2016~~.2023, there were 23,500 stock options exercised.

As of ~~September 30, 2017,~~March 31, 2024, the Company had ~~385,549 options, 331,017~~240,365 RSUs, and ~~252,290~~208,015 PSUs (based on the target ~~number~~achievement for the PSUs awarded) outstanding.

~~12.~~13. Earnings Per Common Share

Basic earnings per share ~~excludes dilution and~~ is computed by dividing net income ~~applicable to stockholders~~ by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilutive impact of all ~~convertible securities~~common stock equivalents on earnings per share. Diluted earnings per share includes common 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~~vested.

No outstanding PSUs and ~~options were to~~RSUs are considered in the Company’s diluted earnings per share computations in any period that involves a net loss because their inclusion would be ~~exercised.~~anti-dilutive.

~~Commencing in 2017, certain stock-based compensation awards~~Employees who are ~~eligible~~awarded RSUs and PSUs are entitled to receive dividend equivalents onfor eligible awards, ~~that fully vest or become~~payable in cash, when and if, the underlying award vests and becomes payable. ~~These~~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.


	Three Months Ended
	March 31,
	2024		2023
	(in millions, except share data)
Net income	$	28.3	$	23.6
Weighted average number of shares outstanding—basic	25,345,942		27,176,823
Effect of dilutive securities:
PSUs	115,021		141,246
Stock options	—		8,286
RSUs	75,008		66,323
Potential dilutive shares	190,029		215,855
Weighted average number of shares outstanding—diluted	25,535,971		27,392,678

14. Segment Reporting

Three Months Ended Nine Months Ended
September 30, September 30,
2017
2016 2017
2016
(in millions, except share data)
Net income available to stockholders—basic and diluted $ 21.9
$ 22.6
$ 69.9
$ 71.2
Weighted average number of shares outstanding—basic 32,563,800
32,449,617
32,454,443
32,497,478
Effect of dilutive securities:
PSUs 243,470
238,633
262,992
196,898
Stock options 180,421
192,827
212,044
251,068
RSUs 66,294
67,885
77,738
70,429
Dilutive potential shares 490,185

499,345
552,774
518,395
Weighted average number of shares outstanding—diluted 33,053,985
32,948,962
33,007,217
33,015,873
The Company operates as a single reportable segment, Insurance Operations, through its wholly owned subsidiaries. In the fourth quarter of 2023, the Company developed and executed an integration plan to consolidate its previously segregated direct-to-consumer operations (Cerity) into the Company's mainstream operations, while retaining its digital distribution capabilities. The integration plan, which will allow the Company to operate more efficiently and generate cost savings, resulted in a change in the composition of our reportable segments by eliminating any distinction for reporting purposes, including stand-alone financial statements, among our former segments, which were: Employers and Cerity.

~~Diluted earnings per share excludes outstanding options~~The Insurance Operations segment represents the traditional business offered through its agents, including business originated from the Company's strategic partnerships and ~~other common stock equivalents in periods where the inclusion of such options~~alliances and ~~common stock equivalents would be anti-dilutive.~~ also direct-to-customer business.

The following table ~~presents options~~summarizes the Company's written premium and components of net income. The prior period has been conformed to current presentation.


	Insurance Operations		Total
	(in millions)
Three Months Ended March 31, 2024
Gross premiums written	$	210.9	$	210.9
Net premiums written	209.1		209.1

Net premiums earned	184.9		184.9
Net investment income	26.8		26.8
Net realized and unrealized gains on investments	11.4		11.4


Total revenues	223.1		223.1

Losses and loss adjustment expenses	116.5		116.5
Commission expense	25.5		25.5
Underwriting and general and administrative expenses	45.8		45.8


Total expenses	187.8		187.8

Net income before income taxes	35.3		35.3
Income tax expense	7.0		7.0
Net income	$	28.3	$	28.3

Three Months Ended March 31, 2023
Gross premiums written	$	194.9	$	194.9
Net premiums written	193.1		193.1

Net premiums earned	172.7		172.7
Net investment income	27.6		27.6
Net realized and unrealized gains on investments	6.4		6.4

Other (loss) income	(0.2)		(0.2)
Total revenues	206.5		206.5

Losses and loss adjustment expenses	107.4		107.4
Commission expense	23.4		23.4
Underwriting and general and administrative expenses	44.4		44.4
Interest and financing expenses	2.3		2.3

Total expenses	177.5		177.5

Net income before income taxes	29.0		29.0
Income tax expense	5.4		5.4
Net income	$	23.6	$	23.6

Entity-Wide Disclosures

The Company operates solely within the U.S. and does not have revenue from transactions with a single policyholder accounting for 10% or more of its revenues.

In-force premiums represent the estimated annual premium on all policies that are active and in-force on such date. More specifically, in-force premiums include policy endorsements but exclude estimated final audit premiums. When adjusting for estimated final audit premium, our total in-force premiums were ~~excluded from diluted earnings per share.~~$757.5 million, $737.5 million, $667.6 million, and $654.9 million as of March 31, 2024, December 31, 2023, March 31, 2023, and December 31, 2022, respectively. The Company's management focuses on in-force premium because it represents premium that is available for renewal in the future. The

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Options excluded under the treasury method as the potential proceeds on settlement or exercise price were greater than the value of shares acquired —
67,431
—
98,021

following table shows our in-force premiums, in-force premiums including estimated final audit premium, and number of policies in-force for each of our largest states and all other states combined for the periods presented:


	March 31, 2024			December 31, 2023			March 31, 2023			December 31, 2022
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	$	320.1	43,832	$	311.5	43,353	$	282.9	42,908	$	279.7	42,876
Florida	57.5		10,277	56.6		10,008	50.5		9,560	49.4		9,417
New York	33.6		7,679	31.9		7,603	28.5		7,478	27.3		7,497


Other (43 states and D.C.)	301.6		65,696	294.6		65,445	269.0		62,738	266.1		61,566
Total in-force	$	712.8	127,484	$	694.6	126,409	$	630.9	122,684	$	622.5	121,356
Estimated audit premium	44.7		—	42.9		—	36.7		—	32.4		—
Total in-force, including estimated audit premium	$	757.5	127,484	$	737.5	126,409	$	667.6	122,684	$	654.9	121,356

Item 2. Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with our consolidated financial statements and the related notes thereto included in Item 1 of Part I. Unless otherwise indicated, all references to ~~“we,” “us,” “our,” “the~~"we," "us," "our," "the Company,”" or similar terms refer to EHI, together with its subsidiaries. ~~The~~In this Quarterly Report on Form 10-Q, the Company and its management discuss and make statements based on currently available information ~~contained~~regarding their intentions, beliefs, current expectations, and projections of, among other things, the Company's future performance, economic or market conditions, including current levels of inflation, changes in ~~this quarterly report~~interest rates, labor market expectations, catastrophic events or geo-political conditions, legislative or regulatory actions or court decisions, business growth, retention rates, loss costs, claim trends and the impact of key business initiatives, future technologies and planned investments. Certain of these statements may constitute "forward-looking" statements as that term is ~~not a complete description of our business or~~defined in the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this quarterly report and in our other reports filed with the Securities and Exchange Commission (SEC), including our Annual Report.

~~The~~ Private Securities Litigation Reform Act of ~~1995 provides a safe harbor for~~1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often identified by words such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "target," "project," "intend," "believe," "estimate," "predict," "potential," "pro forma," "seek," "likely," or "continue," or other comparable terminology and their negatives. The Company and its management caution investors that such forward-looking statements ~~if accompanied by meaningful cautionary statements identifying important factors~~are not guarantees of future performance. Risks and uncertainties are inherent in the Company’s future performance. Factors that could cause the Company's actual results to differ materially from those ~~discussed. You should not place undue reliance~~indicated by such forward-looking statements include, among other things, those discussed or identified from time to time in the Company’s public filings with the SEC, including the risks detailed in the Company's Annual Reports on ~~these statements, which speak only as of the date~~Form 10-K and in Part II, Item 1A of this report. Forward-looking statements include those related to our expected financial position, business, financing plans, litigation, future premiums, revenues, earnings, pricing, investments, business relationships, strategic initiatives, expected losses, accident year loss estimates, loss experience, loss reserves, acquisitions, competition,Except as required by applicable securities laws, the impact of changes in interest rates, rate increases with respect to our business, and the insurance industry in general. Statements including words such as “expect,” “intend,” “plan,” “believe,” “estimate,” “may,” “anticipate,” “will,” or similar statements of a future or forward-looking nature identify forward-looking statements.

~~We undertake~~Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. All forward-looking statements address matters that involve risks and uncertainties that could cause actual results to differ materially from historical or anticipated results, depending on a number of factors. These risks and uncertainties include, but are not limited to, those described in our Annual Report and other documents that we have filed with the SEC.otherwise.

~~Overview~~General

We are a Nevada holding company. Through our insurance subsidiaries, we provide workers’ compensation insurance coverage to small and select ~~small~~ businesses engaged in ~~low to medium~~low-to-medium hazard industries. Workers’ compensation insurance is provided under a statutory system wherein most employers are required to provide coverage for their employees’ medical, disability, vocational rehabilitation, and/or death benefit costs for work-related injuries or illnesses. We provide workers’ compensation insurance in 36 ~~states and~~throughout most of the ~~District of Columbia,~~United States, with a concentration in California, where ~~over one-half~~45% of our ~~business is~~in-force premiums are generated. Our revenues ~~are~~ primarily ~~comprised~~consist of net premiums earned, net investment income, and net realized and unrealized gains and (losses) on investments.

The insurance industry is highly competitive, and there is significant competition in the national workers’ compensation industry that is based on price and quality of services. We compete with other specialty workers’ compensation carriers, state agencies, multi-line insurance companies, professional employer organizations, self-insurance funds, and state insurance pools.

We target small businesses, as we believe that this market is traditionally characterized by ~~fewer competitors,~~ more attractive pricing, and stronger persistency when compared to the U.S. workers’ compensation insurance industry in general. We believe we ~~are able to~~can price our policies at levels that are competitive and profitable over the long-term given our expertise in underwriting and claims handling in this market segment. Our underwriting approach is to consistently underwrite small business accounts at appropriate and competitive prices without sacrificing long-term profitability and stability for short-term top-line revenue growth.

~~Our strategy is to pursue profitable growth opportunities across market cycles and maximize total investment returns within the constraints of prudent portfolio management.~~ We pursue profitable growth opportunities by focusing on disciplined underwriting and claims management, utilizing medical provider networks designed to produce superior medical and indemnity outcomes, establishing and maintaining strong, ~~long-term~~long-

term relationships with ~~independent~~traditional and specialty insurance agencies, ~~and~~ developing important alternative distribution ~~channels.~~ channels, and offering workers' compensation solutions directly to customers.

We believe we have a cost-effective and scalable information technology infrastructure that complements our geographic reach and business model. We continue to invest in technology to automate business processes and further develop our data analytic capabilities, which we believe will enable us to reduce our operating costs over the long-term and set a foundation for our future needs. Our technology saves our insurance agents and brokers, and our policyholders, considerable time and maintains our competitiveness in our target markets.

We also continue to execute a number of ongoing business initiatives, including: ~~focusing on~~achieving internal and customer-facing business process excellence; ~~accelerating the settlement of open claims;~~further diversifying our risk exposure across geographic ~~markets;~~markets and economic sectors, when appropriate; appetite expansion; and utilizing a multi-company pricing ~~platform; utilizing~~platform and territory-specific ~~pricing; and leveraging data-driven strategies to target, price, and underwrite profitable classes of business across all of our markets.~~pricing.

There is significant competition in the national workers' compensation industry that is based on price and quality of services. We compete with other specialty workers' compensation carriers, state agencies, multi-line insurance companies, professional employer organizations, self-insurance funds, and state insurance pools.

Pricing on our renewals showed overall price decreases of 4.4% and 2.8% versus the rate levels in effect on such business a year ago for the three and nine months ended September 30, 2017, respectively. Despite the competitive market conditions we currently face, through our efforts thus far in 2017, we believe that we have continued to write attractive business in new and existing states and have strengthened our relationships with our business partners. As a result, given the strength of our balance sheet, the strong execution of our underwriting, claims, and investment strategies, and our active capital management, we believe that we are well positioned for the current market cycle.Overview

On August 11, 2017, we entered into 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 PRNYSummary Financial Results

~~at closing (which is currently estimated to be approximately $40.0 million); plus (ii) $5.8 million. We expect 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 assumed by PRUS. In addition, PartnerRe Ltd., the parent company of PRUS, has provided us 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.

We 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.

~~Results of Operations~~

A primary measure of our performance is our ability to increase our Adjusted stockholders' equity over the long-term. We believe that this measure is important to our investors, analysts, and other interested parties who benefit from having an objective and consistent basis for comparison with other companies within our industry. The following table shows a reconciliation of our stockholders' equity on a GAAP basis to our Adjusted stockholders' equity.

September 30, 2017 December 31, 2016
(in millions, except share data)
GAAP stockholders' equity $ 917.1
$ 840.6
Deferred reinsurance gain–LPT Agreement 166.4
174.9
Less: Accumulated other comprehensive income, net 90.6
74.5
Adjusted stockholders' equity⁽¹⁾
$ 992.9
$ 941.0


~~(1)~~	~~Adjusted stockholders' equity is a non-GAAP measure consisting of total GAAP stockholders' equity plus the Deferred Gain, less Accumulated other comprehensive income, net.~~

Our net income was ~~$21.9 million and $69.9~~$28.3 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024 compared to ~~$22.6 million and $71.2~~$23.6 million for the corresponding ~~periods~~period of ~~2016.~~ 2023. The key factors that affected our financial performance during the three months ended March 31, 2024, compared to the same period of 2023, included:

•Net premiums earned increased 7.1%;

•Losses and LAE increased 8.5%;

•Underwriting and general and administrative expenses increased 3.2%;

•Underwriting loss of $2.9 million, compared to $2.5 million;

•Net investment income of $26.8 million, compared to $27.6 million; and

•Net realized and unrealized gains on investments of $11.4 million, compared to $6.4 million.

Three Months Ended March 31, 2024

Our underwriting results reflect a 7% increase in net premiums earned, compared to the first quarter of 2023, due to higher new and renewal business premiums. Our investment results benefited from strong and steady net investment income ~~was $13.7 million~~ and ~~$34.2 million~~moderate net realized and unrealized gains.

Three Months Ended March 31, 2023

Our underwriting results reflect a 15% increase in net premiums earned, compared to the first quarter of 2022, due to higher new and renewal business premiums and strong final audit premiums. Our investment results benefited from strong and steady net investment income and moderate net realized and unrealized gains.

Our consolidated financial results of operations for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared to $11.3 million~~March 31, 2024 and ~~$29.7 million for the same periods~~2023 are as follows:


	Three Months Ended
	March 31,
	2024		2023
	(in millions)
Gross premiums written	$	210.9	$	194.9
Net premiums written	$	209.1	$	193.1

Net premiums earned	$	184.9	$	172.7
Net investment income	26.8		27.6
Net realized and unrealized gains on investments	11.4		6.4

Other income (loss)	—		(0.2)
Total revenues	223.1		206.5

Underwriting expenses:
Losses and LAE	116.5		107.4
Commission expense	25.5		23.4

Underwriting and general and administrative expenses	45.8		44.4
Non-underwriting expenses:
Interest and financing expenses	—		2.3

Total expenses	187.8		177.5

Net income before income taxes	35.3		29.0
Income tax expense	7.0		5.4
Net income	$	28.3	$	23.6

I.Review of ~~2016~~. Underwriting Results

Underwriting income or loss is determined by deducting losses and LAE, commission ~~expense,~~expenses, and underwriting and ~~other operating~~general and administrative expenses from net premiums earned.

Our underwriting results ~~of operations during~~for the three ~~and nine~~ months ended ~~September 30, 2017 were impacted by~~March 31, 2024 and 2023 are as follows:


	Three Months Ended
	March 31,
	2024			2023
	(in millions)
Gross premiums written	$	210.9		$	194.9
Net premiums written	$	209.1		$	193.1

Net premiums earned	$	184.9		$	172.7






Losses and LAE	116.5			107.4
Commission expense	25.5			23.4

Underwriting and general and administrative expenses	45.8			44.4












Total underwriting expenses	187.8			175.2
Underwriting loss	$	(2.9)		$	(2.5)
Total impact of the LPT	2.1			2.0
Underwriting loss excluding LPT(1)	$	(0.8)		$	(0.5)

Loss and LAE ratio	63.0		%	62.2		%
Commission expense ratio	13.8			13.5
Underwriting expense ratio	24.8			25.7
Combined ratio	101.6		%	101.4		%
Total impact of the LPT	1.1		%	1.1		%
Combined ratio excluding LPT(1)	102.7		%	102.6		%

(1) The LPT Agreement is a ~~write-off of $7.5 million of previously capitalized costs relating~~non-recurring (loss portfolio transfer) transaction that does not result in any significant ongoing benefits to the ~~development of information technology capabilities that had not yet been placed in service (See —Other Expenses).This charge decreased~~Company. We provide our ~~net~~underwriting income ~~by $4.9 million during~~and combined ratios excluding the ~~third quarter of 2017.~~

Our results of operations during the nine months ended September 30, 2016 were impacted by: (1) favorable development in the estimated reserves ceded under the LPT Agreement that resulted in a $3.1 million cumulative adjustment to the Deferred Gain and reduced our losses and LAE by the same amount during the second quarter of 2016 (LPT Reserve Adjustment) and (2) an increase in the contingent commission receivable under the LPT Agreement that resulted in a $1.8 million cumulative adjustment, which reduced our losses and LAE by the same amount (LPT Contingent Commission Adjustment) during the second quarter of 2016. Collectively, these items increased net income by $4.9 million during the second quarter of 2016.

~~The components of net income are set forth in the following table:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017
2016
(in millions)
Gross premiums written $ 179.2
$ 164.4
$ 561.3
$ 545.7
Net premiums written $ 177.6
$ 163.0
$ 556.8
$ 540.4

Net premiums earned $ 187.9
$ 173.3
$ 535.0
$ 522.8
Net investment income 18.5
17.9
55.4
54.1
Net realized gains on investments 4.1
1.6
7.4
9.1
Gain on redemption of notes payable —
—
2.1
—
Other income 0.4
—
0.5
0.6
Total revenues 210.9

192.8
600.4
586.6

Losses and LAE 116.9
109.0
332.0
328.0
Commission expense 23.7
21.3
66.7
63.5
Underwriting and other operating expenses 33.6
31.7
102.1
101.6
Interest expense 0.3
0.4
1.1
1.2
Other expense 7.5
—
7.5
—
Income tax expense 7.0
7.8
21.1
21.1
Total expenses 189.0
170.2
530.5
515.4
Net income $ 21.9
$ 22.6
$ 69.9
$ 71.2
Less amortization of the Deferred Gain related to losses $ 2.1
$ 2.5
$ 7.0
$ 7.2
Less amortization of the Deferred Gain related to contingent commission 0.4
0.5
1.5
1.5
Less impact of LPT Reserve Adjustments⁽¹⁾
—
—
—
3.1
Less impact of LPT Contingent Commission Adjustments⁽²⁾
—
—
—
1.8
Net income before impact of the LPT Agreement⁽³⁾
$ 19.4
$ 19.6
$ 61.4
$ 57.6


~~(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 inceptioneffects of the LPT ~~Agreement.~~


~~(2)~~	LPT Contingent Commission 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 contingent profit commission been recognized at the inception of the LPT Agreement.

~~(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.

~~We present net income before impact of the LPT Agreement~~ because we believe that ~~it is an important supplemental measure of our ongoing operating performance to be used by~~these measures are useful in providing investors, analysts ~~investors,~~ and other interested parties in evaluating us. The LPT Agreement was a non-recurring transaction under which the Deferred Gain does not affect our ongoing operations, and, consequently, we believe this presentation is useful in providing a meaningful understanding of our ~~operating performance.~~ongoing underwriting performance and provides them with a consistent basis for comparison with other companies in our industry. In addition, we believe ~~this~~that these non-GAAP ~~measure,~~measures, as ~~we have defined it, is~~presented, are helpful to our management in identifying trends in our performance because the LPT ~~Agreement~~ has limited significance onto our current and ongoing operations.

Gross Premiums Written

Gross premiums written were ~~$179.2 million and $561.3~~$210.9 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024 compared to ~~$164.4 million and $545.7~~$194.9 million for the corresponding ~~periods~~period of ~~2016.~~2023. The ~~year-over-year increases for the three and nine months ended September 30, 2017 were primarily due to increases in final audit premiums and increases~~growth in new business ~~premium written, partially offset~~premiums we experienced is the result of an increase in new submissions, quotes and binds in the majority of the states in which we operate, which is being largely driven by ~~declines~~the expansion in the classes of business that we offer. As a result of these continued initiatives, we closed another quarter with a record number of policies in-force. In addition, our renewal ~~business premium, year-over-year. Final audit~~ premiums ~~increased $9.4 million and $7.5 million for~~benefited from continued strong retention rates during the three ~~and nine~~ months ended September 30, 2017, respectively, compared to the same periods of 2016, positively impacted by California Assembly Bill 2883, which limited certain officer's payroll from being excluded from the calculation of premiums effective January 1, 2017. The increases in new business premium were primarily driven by higher payroll exposure, partially offset by decreases in average rates.March 31, 2024.

Net Premiums Written

Net premiums written are gross premiums written less reinsurance premiums ceded. For each of the periods presented, the reinsurance premiums ceded related to our July 1 - June 30 annual reinsurance programs as further described herein.

Net premiums written were ~~$177.6 million and $556.8~~$209.1 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024, compared to ~~$163.0 million and $540.4~~$193.1 million for the corresponding ~~periods~~period of ~~2016.~~2023. Reinsurance premiums ceded were ~~$1.6 million and $4.5~~$1.8 million for each of the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared to $1.4 million~~March 31, 2024 and ~~$5.3 million for the corresponding periods of 2016.~~March 31, 2023.

Net Premiums Earned

Net premiums earned were $187.9 million and $535.0 million for the three and nine months ended September 30, 2017, respectively, compared to $173.3 million and $522.8 million for the corresponding periods of 2016. Net premiums earned are primarily a function of the amount and timing of net premiums previously written.

~~The following table shows the percentage change in our in-force~~Net premiums ~~policy count, average policy size, and payroll exposure upon which our premiums are based for California, where 56% of our premiums~~earned were ~~generated, and for all other states, excluding California:~~

As of September 30, 2017
Year-to-Date (Decrease) Increase Year-Over-Year (Decrease) Increase
Overall California All Other States Overall California All Other States
In-force premiums 1.2 % 0.5 % 2.2 % 1.4 % 0.6 % 2.3 %
In-force policy count 1.1
(2.5 ) 4.7
0.9
(3.5 ) 5.3
Average in-force policy size 0.2
3.1
(2.3 ) 0.5
4.3
(2.8 )
In-force payroll exposure 3.0
4.8
2.0
2.9
4.0
2.3

Our in-force premiums and policy count in the LA Area of California declined 6.8% and 10.2%, respectively, year-over-year as of September 30, 2017, while our in-force premiums and policy count in California outside of the LA Area increased 5.4% and 0.9%, respectively, during the same period. The year-over-year increase in overall in-force premiums was primarily driven by higher payroll exposure and increased policy count.

The following table shows our in-force premiums and number of policies in-force for each state with at least five percent of our in-force premiums and all other states combined for the periods presented:

September 30, 2017 December 31, 2016 September 30, 2016 December 31, 2015
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 $ 349.9
41,051
$ 348.3
42,120
$ 347.8
42,550
$ 352.2
44,080
Florida 40.0
5,611
35.2
5,263
33.3
5,154
29.4
4,735
Illinois 28.7
3,005
30.6
3,106
30.9
3,197
32.5
3,286
Other (33 states and D.C.)
207.7
36,073
204.5
34,333
205.9
34,099
205.4
32,395
Total $ 626.3
85,740
$ 618.6
84,822
$ 617.9
85,000
$ 619.5
84,496

~~Our alternative distribution channels that utilize partnerships and alliances generated~~ ~~$166.4 million~~ ~~and~~ ~~$151.3 million, or~~ ~~26.6%~~ ~~and~~ ~~24.5%, of our in-force premiums as of~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~, respectively. We believe that the bundling of products and services through these relationships contributes to higher retention rates than business generated by our independent agents. These relationships also allow us to access new customers that we may not have access to through our independent agent distribution channel. We continue to actively seek new partnerships and alliances.

~~Net Investment Income and Net Realized Gains on Investments~~

We invest in fixed maturity securities, equity securities, short-term investments, and cash equivalents. Net investment income includes interest and dividends earned on our invested assets and amortization of premiums and discounts on our fixed maturity securities, less bank service charges and custodial and portfolio management fees. We have established a high quality/short duration bias in our investment portfolio.

Net investment income increased 3.4% and 2.4% for the three and nine months ended September 30, 2017, respectively, compared to the same periods of 2016. The average pre-tax book yield on invested assets was 3.2% and 3.1% as of September 30, 2017 and 2016, respectively. The average tax-equivalent yield on our invested assets (which adjusts the book yield of our investments in tax-advantaged securities to an equivalent pre-tax book yield) was unchanged year-over-year at 3.7%. Average invested assets period-over-period remained relatively consistent.

Realized gains and losses on our investments are reported separately from our net investment income. 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 are also recognized when securities are written down as a result of an other-than-temporary impairment.

~~Net realized gains on investments were $4.1 million and $7.4~~$184.9 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024, compared to ~~$1.6 million and $9.1~~$172.7 million for the corresponding ~~periods~~period of 2016. Net realized gains on investments for the three and nine months ended September 30, 2017 and 2016 were primarily related to the sale of fixed maturity and equity securities, resulting from routine rebalancing of our investment portfolio. Net realized gains were partially offset by $0.2 million and $5.3 million in other-than-temporary impairments for the nine months ended September 30, 2017 and 2016, respectively.2023.

~~Additional information regarding our Investments is set forth under “—Liquidity and Capital Resources—Investments.”~~

Losses and LAE, Commission Expenses, and Underwriting ~~and Other Operating~~ Expenses

The combined ratio, a key measurement of underwriting profitability, is the sum of the loss and LAE ratio, the commission expense ratio, and the underwriting and other operating expenses ratio. A combined ratio below 100% indicates that an insurance company is generating an underwriting profit, and conversely, a combined ratio above 100% indicates that an insurance company is generating an underwriting loss.

The following table ~~provides the calculation of~~presents our calendar year combined ratios.

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017
2016
Loss and LAE ratio 62.2 % 62.9 % 62.1 % 62.7 %
Underwriting and other operating expenses ratio 17.9
18.3
19.1
19.5
Commission expense ratio 12.6
12.3
12.4
12.1
Combined ratio 92.7 % 93.5 % 93.6 % 94.3 %

We include all of the operating expenses of our holding company in the calculation of our combined ratio, which served to increase our combined ratios by 1.4 and 1.9 percentage points for the three and nine months ended September 30, 2017, respectively, compared to 1.4 and 1.6 percentage points for the corresponding periods of 2016.

~~Loss and LAE Ratio~~


	Three Months Ended
	March 31,
	2024		2023
Loss and LAE ratio excluding LPT	64.1	%	63.3	%

Loss and LAE ratio - LPT	(1.1)		(1.1)
Commission expense ratio	13.8		13.5
Underwriting expense ratio	24.8		25.7
Combined ratio	101.6	%	101.4	%
Combined ratio excluding LPT	102.7	%	102.5	%

Losses and LAE represents our largest expense item and includes claim payments made, amortization of the Deferred Gain, LPT Reserve Adjustments, LPT Contingent Commission Adjustments, estimates for future claim payments and changes in those estimates for current and prior periods, and costs associated with investigating, defending, and adjusting claims. The quality of our financial reporting depends in large part on accurately predicting our losses and LAE, which are inherently uncertain as they are estimates of the ultimate cost of individual claims based on actuarial estimation ~~techniques and management judgment.~~techniques.

Our indemnity claims frequency (the number of claims expressed as a percentage of payroll) continued to decrease year-over-year and, beginning in the first quarter and continuing through the third quarter of 2017, our loss experience indicates a downward movement in medical and indemnity costs per claim that is reflected in our current accident year loss ~~estimate.~~estimate continues to consider, and benefit from, overall declines in the on-leveled frequency of compensable indemnity claims. We believe that our current accident year loss estimate is adequate; however, ~~given the long-tail nature of our business,~~ ultimate losses will not be known with any certainty for many years. Total claims costs have also been reduced by cost savings associated with our continued focus on accelerating claims settlements.

~~Our~~Loss and LAE Ratio. We analyze our loss and LAE ratios on both a calendar year and accident year basis.

The calendar year loss and LAE ratio ~~decreased 0.7~~is calculated by dividing the losses and ~~0.6 percentage points~~LAE recorded during the calendar year, regardless of when the underlying insured event occurred, by the net premiums earned during that calendar year. The calendar year loss and LAE ratio reflects changes made during the calendar year in reserves for losses and LAE established for insured events occurring in the current and prior years. The calendar year loss and LAE ratio for a particular year will not change in future periods.

The accident year loss and LAE ratio is calculated by dividing cumulative losses and LAE for reported events that occurred during a particular year by the net premiums earned for that year. The accident year loss and LAE ratio for a particular year can decrease or increase when recalculated in subsequent periods as the reserves established for insured events occurring during that year fluctuate.

Our calendar year loss and LAE ratio is analyzed to measure profitability in a particular year and to evaluate the adequacy of premium rates charged in a particular year to cover expected losses and LAE from all periods, including development (whether favorable or unfavorable) of reserves established in prior periods. In contrast, our accident year loss and LAE ratios are analyzed to evaluate underwriting performance and the adequacy of the premium rates charged in a particular year in relation to ultimate losses and LAE from insured events occurring during that year. The loss and LAE ratios provided in this report are on a calendar year basis, except where they are expressly identified as accident year loss and LAE ratios.

The table below reflects prior accident year loss and LAE reserve adjustments and the impact to loss ratio.


	Three Months Ended
	March 31,
	2024			2023
	(dollars in millions)


Current accident year losses and LAE - excluding LPT	$	118.7		$	109.6
Prior accident year favorable loss reserve development, net	(0.1)			(0.2)

Impact of LPT	(2.1)			(2.0)
Calendar year losses and LAE	$	116.5		$	107.4





Current accident year loss and LAE ratio - excluding LPT	64.2		%	63.5		%
Calendar year loss and LAE ratio - excluding LPT	64.1		%	63.3		%
Calendar year loss and LAE ratio	63.0		%	62.2		%

The increase in our calendar year losses and LAE during the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2024, as compared to the same ~~periods~~period of ~~2016, while the amount of our losses~~2023, was primarily due to higher earned premium and ~~LAE increased 7.2% and 1.2% for the three and nine months ended September 30, 2017, respectively. The increases in the amount of our~~a higher accident year loss and LAE ~~were primarily attributable to increases~~

~~in net premiums earned, partially offset by decreases in our current accident year loss estimates. Prior accident year~~estimate. All of the favorable ~~(unfavorable) loss~~ development ~~was~~that we recognized during these periods related to our assigned risk ~~business for all periods presented.~~business.

Our current accident year loss and LAE ratio was ~~63.7%~~64.1% (64.0% excluding involuntary business) for ~~each of~~ the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2024, compared to ~~64.1% and 65.6%~~63.5% (63.3% excluding involuntary business) for the corresponding ~~periods~~period of 2016. The current accident year loss estimate for the nine months ended September 30, 2016 was impacted by $6.5 million in large losses recognized in the second quarter of 2016, which resulted in a 1.2 percentage point increase in the current accident year loss estimate for the nine months ended September 30, 2016. The decrease in our2023. Our current accident year loss and LAE ~~ratio reflects~~ratios continue to reflect the ~~continued~~ impact of key business ~~initiatives, including:~~initiatives: an emphasis on ~~the settlement~~accelerated settlements of open claims; further diversifying ~~our~~its risk exposure across geographic ~~markets;~~markets, when appropriate; and leveraging data-driven strategies to target, underwrite, and price profitable classes of business across all of our markets.

Excluding the impact from the LPT Agreement, losses and LAE would have been ~~$119.4~~$118.4 million and ~~$112.0~~$109.4 million ~~or 63.5% and 64.6% of net premiums earned,~~ for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~,2023, respectively. For the nine months ended September 30, 2017 and 2016, losses and LAE, excluding the impact of the LPT, would have been $340.5 million and $341.6 million, or 63.6% and 65.3% of net premium earned, respectively.

The table below reflects ~~losses and LAE reserve adjustments and~~ the impact of the LPT on ~~net income before taxes.~~Losses and LAE, which are recorded as a reduction to Losses and LAE incurred on our Consolidated Statements of Comprehensive Income (Loss).


	Three Months Ended
	March 31,
	2024		2023
	(in millions)
Amortization of the Deferred Gain related to losses	$	1.5	$	1.6
Amortization of the Deferred Gain related to contingent commission	0.4		0.4

Impact of LPT Contingent Commission Adjustments(1)	0.2		—
Total impact of the LPT	$	2.1	$	2.0

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017
2016
(in millions)
Prior accident year favorable (unfavorable) loss development, net $ 0.2
$ (0.8 ) $ 0.5
$ 1.5
Amortization of the Deferred Gain related to losses $ 2.1
$ 2.5
$ 7.0
$ 7.2
Amortization of the Deferred Gain related to contingent commission 0.4
0.5
1.5
1.5
Impact of LPT Reserve Adjustments —
—
—
3.1
Impact of LPT Contingent Commission Adjustments —
—
—
1.8
Total impact of the LPT on losses and LAE 2.5
3.0
8.5
13.6
Total losses and LAE reserve adjustments $ 2.7
$ 2.2
$ 9.0
$ 15.1
(1)LPT Contingent Commission Adjustments result in an adjustment to the Contingent commission receivable - LPT Agreement, which is recognized in losses and LAE incurred on our Consolidated Statements of Comprehensive Income (Loss). (See Note 9 in the Notes to our Consolidated Financial Statements.)

~~Underwriting and Other Operating~~Commission Expenses Ratio

Commission expenses include direct commissions to our agents and brokers, including our partnerships and alliances, for the premiums that they produce for us, as well as agency incentive payments, other marketing costs, and fees.

Our commission expense ratio was 13.8% and 13.5%, and our commission expenses were $25.5 million and $23.4 million for the three months ended March 31, 2024 and 2023, respectively. The increase for the three months ended March 31, 2024 was primarily related to an increase in new business writings, which are typically subject to higher initial commission rates, and an increase in anticipated 2024 agency incentives.

Underwriting and ~~other operating~~General and Administrative Expense Ratio

Underwriting and general and administrative expenses ~~are~~represent those costs that we incur to underwrite and maintain the insurance policies we issue, excluding ~~commission. These~~commissions. Variable underwriting expenses, ~~include~~such as premium taxes, policyholder dividends, and ~~certain other general~~those expenses that vary directly with ~~and are primarily related to, producing~~the production of new or renewal ~~business. Other~~business, are recognized as the associated premiums are earned. Fixed underwriting ~~expenses include policyholder dividends, changes in estimates of future write-offs of premiums receivable, general administrative~~ expenses, such as ~~salaries and benefits, rent, office supplies, depreciation, and all other~~the operating expenses of EHI and its subsidiaries, do not ~~otherwise classified separately. Policy acquisition costs~~vary directly with the production of new or renewal business and are ~~variable based on premiums earned. Other operating expenses are more fixed in nature and become a smaller percentage of net premiums earned~~recognized as ~~premiums increase.~~incurred.

Our underwriting and ~~other operating~~general and administrative expense ratio was 24.8% and 25.7%, and our underwriting expenses ~~ratio decreased 0.4 percentage points for the three~~were $45.8 million and ~~nine months ended September 30, 2017, respectively, compared to the corresponding periods of 2016. Underwriting and other operating expenses increased 6.0%~~$44.4 million for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~were relatively unchanged for the nine months ended September 30, 2017, compared to the same periods of 2016.~~2023, respectively. The increase in underwriting expenses for the three months ended ~~September 30, 2017~~March 31, 2024 was primarily ~~due to a $1.2~~the result of increases in compensation-related expenses of $2.8 million ~~increase~~and bad debt expense of $2.3 million, partially offset by decreases in ~~our~~depreciation and amortization of $1.6 million, marketing and advertising expenses of $1.0 million, and professional fees of $0.9 million, each compared to the same period of ~~2016. During~~2023.

II. Review of Non-Underwriting Results

Net Investment Income and Net Realized and Unrealized Gains and Losses on Investments

We invest in fixed maturity securities, equity securities, other invested assets, short-term investments, and cash equivalents. Net investment income includes interest and dividends earned on our invested assets and amortization of premiums and discounts on our fixed maturity securities, less bank service charges and custodial and portfolio management fees.

Net investment income decreased 2.9% for the ~~nine~~three months ended September 30, 2017, our bad debt expense decreased $1.2 million and our premium taxes and assessments decreased $0.7 million, offset by a $1.5 million increase in our compensation-related expenses and a $1.0 million increase in our professional fees,March 31, 2024, compared to the same period of ~~2016.~~2023. The decrease was due to a lower invested balance of fixed maturity securities and short-term investments, as measured by amortized

~~Commission Expense Ratio~~

~~Commission expenses~~cost, resulting primarily from the unwinding of our former FHLB leveraged investment strategy, which was in effect from the first quarter of 2022 to the fourth quarter of 2023.

Realized and unrealized gains and losses on our investments are reported separately from our net investment income. Realized gains and losses on investments include ~~direct commissions~~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 are also recognized for changes in our ~~agents~~CECL allowance or when securities are written down because of an other-than-temporary impairment. Changes in the fair value of equity securities and ~~brokers for the premiums that they produce for us, as well as incentive payments,~~ other ~~marketing costs,~~invested assets are also included in Net realized and ~~fees.~~unrealized gains (losses) on investments on our Consolidated Statements of Comprehensive Income (Loss).

~~Our commission expense ratio increased 0.3 percentage points~~Net realized and unrealized gains on investments were $11.4 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024, compared to $6.4 million for the ~~same periods~~corresponding period of ~~2016.~~2023. The ~~increases in~~net realized and unrealized gains on investments for the ~~commission expense ratios~~three months ended March 31, 2024 and 2023 included $12.3 million and $8.0 million of net realized and unrealized gains on equity securities and other investments, respectively, and $0.9 million and $1.6 million of net realized losses on fixed maturity securities, respectively.

The net investment gains and losses on our equity securities during the three months ended March 31, 2024 were largely consistent with the performance of U.S. equity markets. The net realized investment losses on our fixed maturity securities during the three months ended March 31, 2024 were primarily the result of ~~increases in projected 2017 agency incentive commissions and~~ a ~~nine percent year-over-year~~$0.5 million increase in our allowance for CECL.

The net investment gains on our equity securities during the ~~percentage~~three months ended March 31, 2023 were largely consistent with the performance of ~~business produced by~~U.S. equity markets. The net realized investment losses on our ~~partnerships~~fixed maturity securities during the three months ended March 31, 2023 were primarily the result of a $1.4 million increase in our allowance for CECL, which resulted primarily from volatility and ~~alliances, which are subject to a higher commission rate.~~credit concerns in certain financial and banking markets.

Additional information regarding our Investments is set forth under “—Liquidity and Capital Resources—Investments.”

Other Income (Loss)

Other income (loss) consists of net gains and losses on fixed assets, non-investment interest, and other miscellaneous income.

Interest and Financing Expenses

~~We actively invest~~Interest and financing expenses include fees and interest associated with our $75.0 million three-year revolving credit facility, fees and interest associated with our various credit arrangements with the FHLB, finance lease interest, and other financing fees.

Interest and financing expenses were less than $0.1 million for the three months ended March 31, 2024, compared to $2.3 million for the corresponding period of 2023. The decrease resulted primarily from the unwinding of our former FHLB leveraged investment strategy, which was in technology and systems across our business with a view toward maximizing efficiency, facilitating customer self-service, and creating increased capacity that will allow us to lower our expense ratios while growing premiums.

~~During~~effect from the ~~third~~first quarter of ~~2017, we wrote-off $7.5 million of previously capitalized costs relating~~2022 to the ~~development~~fourth quarter of ~~information technology capabilities that had not yet been placed in service. We incurred this charge as part of a continual evaluation of our ongoing technology initiatives.~~2023.

Income Tax Expense

Income tax expense was $7.0 million ~~and $21.1 million~~ for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024, compared to ~~$7.8 million and $21.1~~$5.4 million for the corresponding ~~periods~~period of ~~2016.~~2023. The effective tax rates were ~~24.2% and 23.2%~~19.8% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024, compared to ~~25.7% and 22.9%~~18.6% for the ~~same~~corresponding period of 2023. The effective rates during each of the periods ~~of 2016. Tax-advantaged~~presented included income tax benefits and exclusions associated with tax-advantaged investment income, LPT ~~Reserve Adjustments, Deferred Gain amortization,~~adjustments, and ~~certain other adjustments reduced our effective income tax rate below the U.S. statutory rate of 35%.~~deferred gain amortization.

Liquidity and Capital Resources

~~Holding Company~~We believe that our total capital position remains strong and that the liquidity available to EHI and its subsidiaries remains adequate and will be sufficient for our financing needs in the next 12 months and in the longer term period thereafter. As a result, we do not currently foresee a need to: (i) suspend dividends at either EHI or its insurance subsidiaries; (ii) forego repurchases of EHI's common stock; (iii) seek additional capital; or (iii) seek any material non-investment asset sales.

EHI Liquidity

~~We are~~EHI is a holding company and ~~our~~its ability to fund ~~our~~its operations is contingent upon its existing capital and the ability of ~~our insurance~~its subsidiaries to pay ~~dividends up to the holding company.~~it dividends. Payment of dividends by ~~our~~EHI's insurance subsidiaries is restricted by state insurance laws and regulations, including laws establishing minimum solvency and liquidity thresholds. ~~We require~~EHI requires cash to pay ~~stockholder~~ dividends to its stockholders, repurchase its common stock, ~~make interest and principal payments on any outstanding debt obligations,~~ provide additional surplus to ~~our~~its insurance subsidiaries, and fund ~~our~~its operating expenses.

~~Our~~EHI's insurance ~~subsidiaries'~~subsidiaries’ ability to pay dividends ~~to their parent~~and distributions is based on their reported capital, surplus, and dividends paid within the ~~last 12~~prior twelve months.

During the ~~third~~first quarter of ~~2017,~~2024, ECIC made a ~~$38.0~~$23.3 million ~~cash~~ dividend payment to its parent ~~company.~~company, which in turn distributed that amount to EHI. As a result of that dividend payment, ~~ECIC's dividend capacity is limited to $0.1 million without prior regulatory approval~~ECIC cannot pay dividends for the remainder of ~~2017.~~2024 without prior regulatory approval.

During the first quarter of 2024, EICN made a $13.7 million dividend payment to its parent company, which in turn distributed that amount to EHI. As a result of that dividend payment, EICN cannot pay any dividends for the remainder of 2024 without prior regulatory approval.

Total cash and investments at ~~the holding company~~EHI were ~~$76.6~~$66.6 million at ~~September 30, 2017,~~March 31, 2024, consisting of $40.8 million of cash and cash equivalents, ~~$4.2 million of short-term investments and $31.6~~$1.3 million of fixed maturity ~~securities. The increase in our cash holdings is in anticipation~~securities, and $24.5 million of funding the acquisition of PRNY. We do not currently have a revolving credit facility because we believe that the holding company's cash needs for the foreseeable future will be met with its cash and investments on hand, as well as dividends available from our insurance subsidiaries.equity securities.

Operating ~~Subsidiaries'~~Subsidiaries’ Liquidity

The primary sources of cash for our operating subsidiaries, which include our insurance and other operating subsidiaries, are premium collections, investment income, sales and maturities of investments, and reinsurance recoveries. The primary uses of cash for our ~~insurance~~operating subsidiaries are payments of losses and LAE, commission expenses, underwriting and ~~other operating~~general and administrative expenses, ceded reinsurance, investment purchases and dividends paid to their parent.

Total cash and investments held by our operating subsidiaries was ~~$2,610.0~~$2,427.7 million at ~~September 30, 2017,~~March 31, 2024, consisting of ~~$21.0~~$73.6 million of cash and cash equivalents, ~~$1.3~~and restricted cash, $38.2 million of short-term investments, ~~$2,384.0~~$2,012.5 million of fixed maturity securities, ~~$203.2~~$205.8 million of equity securities, and ~~$0.5~~$97.6 million of other invested assets. Sources of immediate and unencumbered liquidity at our operating subsidiaries as of ~~September 30, 2017~~March 31, 2024 consisted of ~~$19.9~~$73.4 million of cash and cash equivalents, ~~$160.5~~$199.7 million of publicly traded equity securities whose proceeds are available within three business days, ~~and $1,342.8~~$668.5 million of highly liquid fixed maturity securities whose proceeds are available within three business days and $17.7 million of short-term investments whose proceeds are available within three business days. We believe that our ~~subsidiaries'~~subsidiaries’ liquidity needs over the next 12 months and for the ~~foreseeable future~~longer term period thereafter will be met with cash from operations, investment income, and maturing investments.

~~Each~~All of our insurance subsidiaries ~~is a member~~are members of the FHLB. Membership allows our 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~~

FHLB membership also allows our insurance subsidiaries access to standby Letter of ~~our subsidiaries has advances outstanding under~~Credit Agreements. Letter of Credit Agreements we currently have in effect will expire March 31, 2025 and may only be used to satisfy, in whole or in part, insurance deposit requirements with the ~~FHLB facility.~~State of California and are fully secured with eligible collateral at all times (See Note 10).

We purchase reinsurance to protect us against the costs of severe claims and catastrophic ~~events.~~events, including pandemics. On July 1, ~~2017,~~2023, we entered into a new reinsurance program, ~~that~~which is largely unchanged from our expiring reinsurance program, which is effective through June 30, ~~2018.~~2024. The reinsurance program consists of one treaty covering excess of loss and catastrophic loss events in four layers of coverage. Our reinsurance coverage is $190.0 million in excess of our $10.0 million retention on a per occurrence basis, subject to certain exclusions. We believe that our reinsurance program meets our needs and that we are sufficiently capitalized.

Various state laws and regulations require us to hold investment securities or letters of credit on deposit with certain states in which we do business. Securities having a fair value of ~~$1,017.7~~$760.6 million and ~~$1,009.7~~$748.1 million were on deposit at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016~~,2023, respectively. These laws and regulations govern both the amount and types of investment securities that are eligible for deposit. Additionally, ~~certain~~standby letters of credit from the FHLB have been issued in lieu of $70.0 million securities on deposit at both March 31, 2024 and December 31, 2023.

Certain reinsurance contracts require company funds to be held in trust for the benefit of the ceding reinsurer to secure the outstanding liabilities we have assumed. The fair value of fixed maturity securities held in trust for the benefit of our ceding reinsurers was ~~$25.2~~$3.0 million at both March 31, 2024 and ~~$27.2 million~~ at ~~September 30, 2017~~ ~~and~~ December 31, ~~2016~~,2023, respectively.

Sources of Liquidity

We monitor the cash flows of each of our subsidiaries individually, as well as collectively as a consolidated group. We use trend and variance analyses to project future cash needs, making adjustments to our forecasts as appropriate.

The table below shows our net cash flows for the ~~nine~~three months ~~ended.~~ended:


								March 31,
	September 30,							2024	2023
	2017			2016				(in millions)
	(in millions)
Cash and cash equivalents provided by (used in):
Cash, cash equivalents, and restricted cash provided by (used in):							Cash, cash equivalents, and restricted cash provided by (used in):
Operating activities	$	103.8		$	97.0
Investing activities	(78.0		)	(49.1		)
Financing activities	(23.6		)	(20.4		)
Increase in cash and cash equivalents	$	2.2		$	27.5
Decrease in cash, cash equivalents, and restricted cash

For additional information regarding our cash flows, see Item 1, Consolidated Statements of Cash Flows.

Operating Activities

Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024, included net premiums received of ~~$528.4~~$185.1 million and investment income received of ~~$67.9~~$26.2 million. The cash provided by these operating activities were largely offset by net claims payments of $124.6 million, underwriting and general and administrative expenses paid of $57.3 million, and commissions paid of $28.8 million.

Net cash provided by operating activities for the three months ended March 31, 2023, included net premiums received of $171.7 million and investment income received of $26.8 million. These operating cash inflows were partially offset by net claims payments of ~~$314.8~~$111.5 million, underwriting and ~~other operating~~general and administrative expenses paid of ~~$96.5~~$53.9 million, ~~and~~ commissions paid of ~~$61.9 million.~~

~~Net cash provided by operating activities for the nine months ended September 30, 2016 included net premiums received of $525.0~~$26.5 million, and ~~investment income received of $65.8 million. These operating cash inflows were partially offset by net claims payments of $323.0 million, underwriting and other operating expenses~~interest paid of ~~$97.2 million, and commissions paid of $62.3~~$2.3 million.

Investing Activities

Net cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2017 and 2016 were~~March 31, 2024, related primarily ~~related~~ to ~~the~~ investment of premiums received and the reinvestment of funds from invest sales, maturities, redemptions, and interest income. ~~These investing~~The cash ~~outflows were~~used in these investment activities was partially offset by investment sales, maturities, and redemptions whose proceeds were used to fund claims payments, underwriting and ~~other operating~~general and administrative expenses, ~~and~~ stockholder dividend payments, and ~~for~~ common stock ~~repurchases during~~repurchases.

Net cash provided by investing activities for the ~~nine~~three months ended ~~2016.~~March 31, 2023, related primarily to investment sales, maturities, and redemptions whose proceeds were used to fund claims payments, underwriting and general and administrative expenses, stockholder dividend payments, and common stock repurchases. These investing cash inflows were partially offset by the investment of premiums received and reinvestment of funds from investment sales, maturities, redemptions, and interest income.

Financing Activities

Net cash used in financing activities for the ~~nine~~three months ended ~~September 30, 2017 was~~March 31, 2024 and 2023, related primarily ~~related~~ to stockholder dividend payments and ~~the redemption of a note payable.~~common stock repurchases.

~~Net cash used~~Dividends

We paid $7.8 million and $7.6 million in ~~financing activities~~dividends to our stockholders and eligible plan award holders for the ~~nine~~three months ended ~~September 30, 2016 included purchases~~March 31, 2024 and 2023, respectively. The declaration and payment of ~~our~~future dividends to common ~~stock and stockholder dividend payments, partially offset by net proceeds from exercises~~stockholders, including any special dividends that may be declared in the future, will be at the discretion of ~~stock options.~~

~~Dividends~~

~~Stockholder dividends paid were $14.7 million and $8.8 million for the nine months ended September 30, 2017 and 2016, respectively. On October 25, 2017, the~~our Board of Directors (Board) and will depend upon many factors including our financial position, capital requirements of our operating subsidiaries, legal and regulatory requirements, and any other factors that our Board deems relevant. On April 24, 2024, the Board declared a ~~$0.15~~quarterly dividend per share ~~and eligible RSU and PSU,~~of $0.30, which is payable ~~November~~May 22, ~~2017,~~2024 to stockholders of record on ~~November~~May 8, ~~2017.~~2024.

~~Share~~Stock Repurchases

~~On February 16, 2016, the Board of Directors authorized a share repurchase program for up to $50.0 million~~We repurchased 123,073 shares of our common stock ~~from February 22, 2016 through February 22, 2018 (the 2016 Program). Through September 30, 2017, we repurchased a total~~for $4.9 million during the three months ended March 31, 2024. Future repurchases of ~~724,381 shares of~~our common stock ~~under~~will be at the ~~2016 Program at an average price~~discretion of ~~$29.08 per share,~~our Board and will depend upon many factors, including ~~commissions, for a total cost~~our financial position, capital requirements of ~~$21.1 million. We made no repurchases of common stock during the nine months ended September 30, 2017.~~our operating subsidiaries, general business and socioeconomic conditions, legal, tax, regulatory, and/or contractual restrictions, and any other factors that our Board deems relevant.

Capital Resources

As of ~~September 30, 2017,~~March 31, 2024, the capital resources available to us consisted ~~of: (i) $20.0 million in surplus notes maturing in 2034; (ii) $917.1~~of $1,018.9 million of stockholders’ ~~equity;~~equity and ~~(iii)~~ the ~~$166.4~~$97.2 million Deferred Gain.

~~Notes Payable~~

~~In May of 2017, we redeemed $12.0 million of notes payable for $9.9 million, resulting in a $2.1 million gain.~~

Contractual Obligations and Commitments

~~The~~Other than operating expenses, our current and long-term cash requirements include the following ~~table identifies our debt and~~ contractual obligations and commitments as of ~~September 30, 2017.~~March 31, 2024:

Leases

Payment Due By Period
Total
Less Than
1-Year
1-3 Years 4-5 Years
More Than
5 Years
(in millions)
Operating leases $ 27.4
$ 4.7
$ 9.3
$ 5.0
$ 8.4
Purchase obligations 3.8
2.7
0.9
0.2
—
Notes payable⁽¹⁾
38.5
1.1
2.2
2.2
33.0
Capital leases 0.9
0.3
0.4
0.2
—
Losses and LAE reserves ⁽²⁾⁽³⁾
2,298.9
394.9
489.5
284.6
1,129.9
Total contractual obligations $ 2,369.5
$ 403.7
$ 502.3
$ 292.2
$ 1,171.3


~~(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 5.4% to 5.6%.~~

~~(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:~~

We have entered into lease arrangements for certain equipment and facilities. As of March 31, 2024, we had lease payment obligations totaling $5.8 million, of which $1.8 million is payable within 12 months.

Recoveries Due By Period
Total
Less Than
1-Year
1-3 Years 4-5 Years
More Than
5 Years
(in millions)
Reinsurance recoverables for unpaid losses and LAE $ (553.1 ) $ (29.7 ) $ (56.4 ) $ (52.7 ) $ (414.3 )
Other Purchase Obligations

We have other purchase obligations that primarily consist of non-cancellable obligations to acquire capital assets, commitments for information technology and related services, software acquisition and license commitments and other legally binding agreements to purchase services that are to be used in our operations. As of March 31, 2024, we had other purchase obligations totaling $14.1 million, of which $3.4 million is payable within 12 months.

Unfunded Investment Commitments

We have investments in private equity limited partnerships that require capital distributions to fund the investments and can be called any time. As of March 31, 2024, we had unfunded investment commitments totaling $19.0 million.

Unpaid Losses and LAE Expenses

We have developed unpaid losses and LAE expense payment patterns that are computed based on historical information. Our calculation of loss and LAE expense 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, to the extent that current estimates of losses and LAE expense vary from actual ultimate claims amounts due to variations between expected and actual payment patterns. As of March 31, 2024, we had unpaid losses and LAE reserves totaling $1,874.5 million, of which $300.1 million is currently expected to be paid within 12 months.

The unpaid losses and LAE expense payment patterns are gross of reinsurance recoverables for unpaid losses. As of March 31, 2024, we had reinsurance recoverables on unpaid losses and LAE totaling $424.0 million, of which $29.9 million is currently expected to be received within 12 months.

Investments

Our investment portfolio is structured to support our need for: (i) optimizing our risk-adjusted total ~~return;~~returns; (ii) providing adequate liquidity; (iii) facilitating financial strength and stability; and (iv) ensuring regulatory and legal compliance.

~~As of September 30, 2017, the total amortized cost of our investment portfolio was~~ ~~$2,485.4 million~~ ~~and its fair value was~~ ~~$2,624.8 million~~. These investments provide a steady source of income, which may fluctuate with changes in interest rates and our current investment strategies.

As of ~~September 30, 2017~~,March 31, 2024, our investment portfolio ~~which is classified as available-for-sale,~~ consisted of ~~92.0%~~ ~~fixed maturity securities. We strive to limit interest rate risk associated with fixed maturity investments by managing the duration of these securities. Our~~85% fixed maturity securities ~~(excluding cash and cash equivalents)~~which had a duration of ~~4.1~~4.5 at ~~September 30, 2017. To minimize interest rate risk, our portfolio is weighted toward short-term and intermediate-term bonds; however, our~~March 31, 2024. Our investment strategy balances consideration of duration, yield, and credit risk. Our investment guidelines require that the minimum weighted average quality of our fixed maturity securities portfolio be ~~"AA-,"~~“A,” using ratings assigned by Standard & ~~Poor's~~Poor’s (S&P). or an equivalent rating assigned by another nationally recognized statistical rating agency. Our fixed maturity securities portfolio had a weighted average quality of ~~"AA-"~~“A+” as of ~~September 30, 2017, with 54.2%~~March 31, 2024. Other securities within fixed maturity securities consist of ~~the portfolio rated "AA" or better, based on market value.~~

~~We also have a modest portfolio of equity securities,~~bank loans, which ~~we record~~are classified as AFS and are reported at fair value.

Our investment portfolio also contains equity securities. We strive to limit the exposure to equity price risk associated with publicly traded equity securities ~~by investing primarily in mid-to-large capitalization issuers and~~ by diversifying our holdings across several industry sectors. ~~Equity~~These equity securities had a fair value of $224.3 million at March 31, 2024, which represented ~~7.7%~~10% of our investment portfolio at ~~September 30, 2017~~.that time. We also have a $6.0 million investment in FHLB stock which we record at cost. We receive periodic dividends from the FHLB for this investment, when declared, which can vary from period to period.

Our other invested assets made up 4% of our investment portfolio as of March 31, 2024 and include private equity limited partnerships. Our investments in private equity limited partnerships totaled $97.6 million at March 31, 2024 and are generally not redeemable by the investees and cannot be sold without prior 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. We expect to receive distributions of proceeds from dividends and interest from fund investments, as well as from the disposition of a fund investment or portion thereof, from time-to-time during the full course of the fund term. As of March 31, 2024, we had unfunded commitments to these private equity limited partnerships totaling $19.0 million.

We believe that our current asset allocation meets our strategy to preserve capital for claims and policy liabilities and to provide sufficient capital resources to support and grow our ongoing insurance operations.

The following table shows the estimated fair value, the percentage of the fair value to total invested assets, ~~the average book yield,~~ and the average ~~tax equivalent~~ending book yield, (each based on the ~~fair value~~"book value" of each category of invested assets) as of ~~September 30, 2017~~.March 31, 2024.


Category	Estimated Fair Value		Percentage of Total		Book Yield
	(in millions, except percentages)
U.S. Treasuries	$	63.0	2.8	%	3.1	%
U.S. Agencies	2.1		0.1		2.9
States and municipalities	199.8		8.8		4.0
Corporate securities	939.5		41.1		3.8
Residential mortgage-backed securities	370.0		16.3		3.5
Commercial mortgage-backed securities	63.2		2.8		3.9
Asset-backed securities	176.7		7.8		5.3
Collateralized loan obligations	72.8		3.2		7.3
Foreign government securities	10.0		0.4		2.8
Other securities	116.7		5.1		8.7
Equity securities	224.3		9.9		3.1
Short-term investments	38.2		1.7		5.5
Total investments at fair value	$	2,276.3	100.0	%
Weighted average yield					4.3	%

Category
Estimated Fair
Value

Percentage
of Total
Book Yield Tax Equivalent Yield
(in millions, except percentages)
U.S. Treasuries $ 132.6
5.1 % 1.8 % 1.8 %
U.S. Agencies 13.4
0.5
4.1
4.1
States and municipalities 700.4
26.7
3.1
4.5
Corporate securities 1,060.3
40.4
3.0
3.0
Residential mortgage-backed securities 363.2
13.8
3.0
3.0
Commercial mortgage-backed securities 91.6
3.5
2.8
2.8
Asset-backed securities 54.6
2.1
2.7
2.7
Equity securities 203.2
7.7
6.1
8.0
Short-term investments 5.5
0.2
1.1
1.1
Total $ 2,624.8
100.0 %
Weighted average yield

3.2 % 3.7 %

The following table shows the percentage of total estimated fair value of our fixed maturity securities as of ~~September 30, 2017~~March 31, 2024 by credit rating category, using the lower of the ratings assigned by ~~Moody's~~Moody’s Investors Service or S&P.


Rating
~~Rating~~	Percentage of Total Estimated Fair Value
“AAA”		11.5	~~8.6~~	%
“AA”		34.0	~~45.6~~
“A”		31.4	~~31.8~~
“BBB”		13.7	~~13.6~~
Below ~~investment grade~~Investment Grade		9.4	~~0.4~~
Total		100.0	~~100.0~~	%

Investments that we currently own could be subject to default by the ~~issuer or could suffer declines in fair value that become other-than-temporary.~~issuer. We regularly assess individual securities as part of our ongoing portfolio management, including the identification of ~~other-than-temporary declines in fair value.~~credit related losses. Our ~~other-than-temporary impairment~~ assessment includes reviewing the extent ~~and duration~~ of declines in ~~the~~ fair value of investments below amortized cost, historical and projected financial performance and near-term prospects of the issuer, the outlook for industry sectors, credit rating, and macro-economic changes. We also make a determination as to whether it is not more likely than not that we will be required to sell the security before its fair value recovers to above cost, or maturity.

~~We believe that~~In addition to recognizing realized gains and losses upon the disposition of an investment security, we ~~have appropriately identified~~also recognize realized losses and recoveries of previously recorded realized losses on AFS debt securities for changes in CECL. As of March 31, 2024, we maintained a CECL allowance of $3.2 million on AFS debt securities. During the ~~declines in the fair values of our unrealized losses for the nine~~three months ended ~~September 30, 2017. We determined that the unrealized losses~~March 31, 2024, we recognized a net $0.5 million increase to our allowance for CECL on AFS debt securities. The remaining fixed maturity securities ~~were primarily the result of prevailing interest rates and not the credit quality of the issuers. The fixed maturity securities~~ whose total fair value was less than amortized cost at March 31, 2024, were ~~not determined to be other-than-temporarily impaired given the severity and duration of the impairment, the credit quality of the issuers, the Company’s~~those in which we had no intent, ~~to not sell the securities, and a determination that it is not more likely than not that the Company will be required~~need, or requirement to sell ~~the securities until fair value recovers to above cost, or principal value upon maturity.~~

~~We recognized~~at an impairment of $0.2 million (from one equity security) during the nine months ended September 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 equity security. Certain unrealized losses on equity securities were not considered to be other-than-temporary due to the financial condition and near-term prospects of the issuers, and our intent to hold the securities until fair value recovers to aboveamount less than their amortized cost.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting ~~Policies~~Estimates

~~These~~The unaudited interim consolidated financial statements included in this quarterly report include amounts based on the use of estimates and judgments of management for those transactions that are not yet complete. We believe that the estimates and judgments that were most critical to the preparation of the consolidated financial statements involved the ~~following: (a)~~ reserves for losses and ~~LAE; (b)~~LAE and reinsurance ~~recoverables; (c) recognition of premium income; (d) deferred income taxes; and (e) valuation of investments.~~recoverables. These estimates

and judgments require the use of assumptions about matters that are highly uncertain and therefore are subject to change as facts and circumstances develop. Our accounting policies are discussed under "Critical Accounting ~~Policies"~~Estimates" in ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of potential economic loss principally arising from adverse changes in the fair value of financial instruments. The major components of market risk affecting us are credit risk, interest rate risk, and equity price risk.

Credit Risk

Our fixed maturity securities, equity securities, other invested assets and cash equivalents are exposed to credit risk, which we attempt to mitigate through issuer and ~~are described in detail in our Annual Report~~industry diversification. Our investment guidelines include limitations on ~~Form 10-K. We have not experienced any material changes in market risk since~~ ~~December 31, 2016~~.

~~The primary market risk exposure to our investment portfolio, which consists primarily~~the minimum rating of fixed maturity securities ~~is interest rate risk.~~ and concentrations of a single issuer.

We ~~have~~also bear credit risk with respect to the ~~ability~~reinsurers, which can be significant considering that some loss reserves remain outstanding for an extended period of time. We are required to ~~hold fixed maturity securities~~pay losses even if a reinsurer refuses or fails to ~~maturity and we strive~~meet its obligations to ~~limit interest rate risk by managing duration. As of~~ ~~September 30, 2017, our fixed maturity securities portfolio had a duration of~~ ~~4.1~~us under the applicable reinsurance agreement(s). We continually monitor the ~~impact~~financial condition and financial strength ratings of our reinsurers. Additionally, we bear credit risk with respect to premiums receivable, which is generally diversified due to the large number of entities comprising our policyholder base and their dispersion across many different industries and geographies.

The economic disruptions caused by financial market volatility, inflationary pressures, and heightened geo-political conditions, have impacted the credit risk associated with certain of our investment holdings. As of March 31, 2024, we maintained a $3.2 million allowance for CECL on our fixed maturity portfolio. See Note 5 to the consolidated financial statements.

Interest Rate Risk

Investments

The fair value of our fixed maturity portfolio is exposed to interest rate risk, which is the risk of a change in fair value resulting from changes in prevailing interest rates, which we manage through duration. Our fixed maturity investments (excluding cash and cash equivalents) had a duration of 4.5 at March 31, 2024. Our investment strategy balances consideration of duration, yield and credit risk. We continually monitor the changes in interest rates and their impact on our liquidity and ability to meet our obligations.

Sensitivity Analysis

The fair values or cash flows of market sensitive instruments are subject to potential losses in future earnings resulting from changes in interest rates and other market conditions. Our sensitivity analysis applies a hypothetical parallel shift in market rates and reflects what we believe are reasonably possible near-term changes in those rates (covering a period of time going forward up to one year from the date of the consolidated financial statements). Actual results may differ from the hypothetical change in market rates assumed in this disclosure. This sensitivity analysis does not reflect the results of any action that we may take to mitigate such hypothetical losses in fair value.

We use fair values to measure our potential loss in this model, which includes fixed maturity securities and short-term investments. For invested assets, we use modified duration modeling to calculate changes in fair values. Durations on invested assets are adjusted for call, put, and interest rate reset features. Invested asset portfolio durations are calculated on a market value weighted basis, excluding accrued investment income, using holdings as of March 31, 2024. The estimated changes in fair values on our fixed maturity securities and short-term investments, which had an aggregate value of $2,052.0 million as of March 31, 2024, based on specific changes in interest rates are as follows:


Hypothetical Changes in Interest Rates	Estimated Pre-tax Increase (Decrease) in Fair Value
	(in millions, except percentages)
300 basis point rise	$	(240.9)	(11.7)	%
200 basis point rise	(164.2)		(8.0)
100 basis point rise	(82.0)		(4.0)
50 basis point decline	50.5		1.9
100 basis point decline	96.7		4.7
200 basis point decline	190.9		9.3
300 basis point decline	285.5		13.9

The most significant assessment of the effects of hypothetical changes in interest rates on investment income would be based on GAAP guidance related to "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases,"which requires amortization adjustments for mortgage-backed securities. The rates at which the mortgages underlying mortgage-backed securities are prepaid, and therefore the average life of mortgage-backed securities, can vary depending on changes in interest rates (for example, mortgages are prepaid faster and the average life of mortgage-backed

securities falls when interest rates decline). Adjustments for changes in amortization are based on revised average life assumptions and would have an impact on investment income if a significant portion of our commercial and residential mortgage-backed securities were purchased at significant discounts or premiums to par value. As of March 31, 2024, the par value of our commercial and residential mortgage-backed securities holdings was $472.2 million, and the amortized cost was 102.0% of par value. Since a majority of our mortgage-backed securities were purchased at a premium that is significant as a percentage of par, an adjustment could have a significant effect on investment income. The commercial and residential mortgage-backed securities portion of the portfolio represented 19.1% of our total investments as of March 31, 2024. Agency-backed residential mortgage pass-throughs represented 86.0% of the residential mortgage-backed securities portion of the portfolio as of March 31, 2024.

Equity Price Risk

Equity price risk is the risk that we may incur losses in the fair value of the equity securities we hold in our investment portfolio. Adverse changes in the market prices of the equity securities we hold in our investment portfolio would result in decreases in the fair value of our total assets on our Consolidated Balance Sheets and ~~liquidity obligations. Changes~~in net realized and unrealized gains on our Consolidated Statements of Comprehensive Income (Loss). Economic and market disruptions caused by geo-political conditions, inflationary pressures and credit concerns in certain financial and banking markets, have resulted in volatility in the fair value of our equity securities. We minimize our exposure to equity price risk by investing primarily in the equity securities of mid-to-large capitalization issuers and by diversifying our equity holdings across several industry sectors.

The table below shows the sensitivity of our equity securities at fair value to price changes as of March 31, 2024:


(in millions)	Cost		Fair Value		10% Fair Value Decrease		Pre-tax Impact on Decrease in Total Equity Securities		10% Fair Value Increase		Pre-tax Impact on Increase in Total Equity Securities
Equity securities	$	125.9	$	224.3	$	201.9	$	(22.4)	$	246.7	$	22.4

Effects of Inflation

In recent years, economic slowdowns, financial market ~~risk, if any, since~~ ~~December 31, 2016~~ ~~are reflected~~volatility, monetary and fiscal policy measures, heightened geo-political tensions and fluctuations in ~~Management’s Discussion~~interest rates have contributed to higher levels of inflation and ~~Analysis~~may continue to lead to elevated levels of ~~Financial Condition and Results~~inflation in future periods.

Higher levels of ~~Operations and the~~inflation than we have anticipated could significantly impact our financial statements ~~contained~~and results of operations. Our estimates for losses and LAE include assumptions about the timing of closure and future payment of claims and claims handling expenses, such as medical treatments and litigation costs. Inflation is also incorporated in ~~this Form 10-Q.~~our reserving process through projections supported by historical loss emergence. Under the current elevated inflationary environment, additional inflationary considerations were included in determining the level and adequacy of our reserves, and particular consideration was given to medical and hospital inflation rates as these inflation rates have historically exceeded general inflation rates. To the extent that inflation causes these costs to increase above established reserves, we will be required to increase those reserves for losses and LAE, reducing our earnings in the period in which our assumptions are revised.

Higher levels of wage inflation can specifically impact the payrolls of our insureds, which is the basis for the premiums we charge, as well as amount of future indemnity losses we may incur.

Higher levels of inflation could also impact our operating expenses and, in the case of wage inflation, could impact our payroll expenses.

Increases in market interest rates that have occurred in recent years are intended to aid in the suppression of inflation, negatively impacted the market value of our existing fixed maturity investments while increasing the yields on our new and variable rate fixed maturity investments.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended (Exchange~~ Act)), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time-to-time, the Company is involved in pending and threatened litigation in the normal course of business in which claims for monetary damages are asserted. In the opinion of management, the ultimate liability, if any, arising from such pending or threatened litigation is not expected to have a material effect on our results of operations, liquidity, or financial position.

Item 1A. Risk Factors

We have disclosed in our Annual Report the most significant risk factors that can impact year-to-year comparisons and that may affect the future performance of the ~~Company’s~~Company's business. On a quarterly basis, we review these disclosures and update the risk factors, as appropriate. As of the date of this report, there have been no material changes to the risk factors contained in our Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to the ~~Company's~~Company’s repurchases of its common stock during the ~~third quarter~~three months ended March 31, 2024:


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)
January 1 - January 31	111,973	$	39.40	111,973	$	16.6
February 1 - February 29	11,100	39.99		11,100	16.2
March 1 - March 31	—	—		—	16.2
	123,073	$	39.45	123,073

On July 26, 2023, the Board authorized a new stock repurchase authorization (the "2023 Program") for up to $50.0 million of ~~2017:~~repurchases of our common stock from July 31, 2023 through December 31, 2024, unless otherwise extended, terminated or modified by the Board. The 2023 Program provides that shares may be purchased in the open market and/or in privately negotiated transactions from time to time, and that all purchases shall be made in compliance with all applicable provisions of the Nevada Revised Statutes and federal and state securities laws including, but not limited to, Rules 10b5-1 and 10b-18 of the Exchange Act.

Period Total Number of Shares Purchased
Average
Price Paid
Per Share⁽¹⁾
Total Number of Shares Purchased as Part of Publicly Announced Program
Approximate
Dollar Value of Shares that
May Yet be Purchased Under the Program⁽²⁾
(in millions)
July 1 – July 31, 2017 —
$ —
—
$ 28.9
August 1 – August 31, 2017 —
—
—
28.9
September 1 – September 30, 2017 —
—
—
28.9
Total —
$ —
—


~~(1)~~	~~Includes fees and commissions paid on stock repurchases.~~

~~(2)~~

On February 16, 2016, the Board of Directors authorized a share repurchase program for repurchases of up to $50 million of the Company's common stock (the 2016 Program). We expect that shares may be purchased at prevailing market prices through February 22, 2018 through a variety of methods, including open market or private transactions, in accordance with applicable laws and regulations and as determined by management. The timing and actual number of shares that may be purchased will depend on a variety of factors, including the share price, corporate and regulatory requirements, and other market and economic conditions. Repurchases under the 2016 Program may be commenced, modified, or suspended from time to time without prior notice, and the program may be suspended or discontinued at any time.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~

Rule 10b5-1 Trading Plans

During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each such term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

Incorporated by Reference Herein

Exhibit
No.

Description of Exhibit

Included
Herewith

Form

File No.

Exhibit

Filing Date

*10.1

E mployers Holdings , Inc. For m of Ann ua l Cash Bonus Program Award Agreement

31.1

Certification of Katherine H. Antonello Pursuant to Section 302

31.2

Certification of Michael S. Paquette Pursuant to Section 302

32.1

Certification of Katherine H. Antonello Pursuant to Section 906

32.2

Certification of Michael S. Paquette Pursuant to Section 906

101.INS

The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Stockholders' Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Incorporated by Reference Herein
Exhibit
No.
Description of Exhibit
Included
Herewith
Form File No. Exhibit Filing Date
3.1
Amended and Restated Bylaws of Employers Holdings, Inc.
10-Q 3.1 April 27, 2017
10.1
Form of Performance Share Agreement
10-Q 10.2 April 27, 2017
10.2
Form of Restricted Stock Unit Agreement
10-Q 10.3 April 27, 2017
*10.3
Amended and Restated Employment Agreement by and between Employers Holdings, Inc. and Tracey L. Berg, dated June 26, 2017, and effective as of January 1, 2018
8-K 001-33245 10.1 June 30, 2017
*10.4
Amended and Restated Employment Agreement by and between Employers Holdings, Inc. and Stephen V. Festa, dated June 26, 2017, and effective as of January 1, 2018
8-K 001-33245 10.2 June 30, 2017
*10.5
Amended and Restated Employment Agreement by and between Employers Holdings, Inc. and John P. Nelson, dated June 26, 2017, and effective as of January 1, 2018
8-K 001-33245 10.3 June 30, 2017
*10.6
Amended and Restated Employment Agreement by and between Employers Holdings, Inc. and Lenard T. Ormsby, dated June 26, 2017, and effective as of January 1, 2018
8-K 001-33245 10.4 June 30, 2017
10.7
Stock Purchase Agreement, between Employers Group, Inc. and Partner Reinsurance Company of the U.S., dated as of August 11, 2017
8-K 001-33245 10.1 August 15, 2017
31.1
Certification of Douglas D. Dirks Pursuant to Section 302
X
31.2
Certification of Michael S. Paquette Pursuant to Section 302
X
32.1
Certification of Douglas D. Dirks Pursuant to Section 906
X
32.2
Certification of Michael S. Paquette Pursuant to Section 906
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

~~—————~~

*Represents management contracts and compensatory plans or arrangements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EMPLOYERS HOLDINGS, INC.


Date:			April 26, 2024
~~Date:~~	~~October 26, 2017~~	/s/ Michael S. Paquette
				Michael S. Paquette
				Executive Vice President and Chief Financial Officer
				Employers Holdings, Inc.
				(Principal Financial and Accounting Officer)

3039



Employers Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Nine Months Ended September 30, 2017 and 2016
(Unaudited)

	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income, Net		Treasury Stock at Cost			Total Stockholders' Equity
	Shares Issued	Amount		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income, Net		Treasury Stock at Cost			Total Stockholders' Equity
	(in millions, except share data)
Balance, January 1, 2017	56,226,277	$	0.6	$	372.0		$	777.2		$	74.5	$	(383.7	)	$	840.6
Stock-based obligations	—	—		4.0			—			—		—			4.0
Stock options exercised	169,024	—		3.3			—			—		—			3.3
Vesting of RSUs and PSUs, net of shares withheld to satisfy minimum tax withholding	125,983	—		(2.1		)	—			—		—			(2.1		)
Dividends declared	—	—		—			(14.7		)	—		—			(14.7		)
Net income for the period		—		—			69.9			—		—			69.9
Change in net unrealized gains on investments, net of taxes of $8.7		—		—			—			16.1		—			16.1
Balance, September 30, 2017	56,521,284	$	0.6	$	377.2		$	832.4		$	90.6	$	(383.7	)	$	917.1

Balance, January 1, 2016	55,589,454	$	0.6	$	357.2		$	682.0		$	83.6	$	(362.6	)	$	760.8
Stock-based obligations	—	—		4.3			—			—		—			4.3
Stock options exercised	484,829	—		7.7			—			—		—			7.7
Vesting of RSUs and PSUs, net of shares withheld to satisfy minimum tax withholding	50,691	—		(0.6		)	—			—		—			(0.6		)
Acquisition of common stock	—	—		—			—			—		(18.6		)	(18.6		)
Dividends declared	—	—		—			(8.7		)	—		—			(8.7		)
Net income for the period		—		—			71.2			—		—			71.2
Change in net unrealized gains on investments, net of taxes of $18.3		—		—			—			34.0		—			34.0
Balance, September 30, 2016	56,124,974	$	0.6	$	368.6		$	744.5		$	117.6	$	(381.2	)	$	850.1



	Level 3 Securities
	2017			2016
	(in millions)
Beginning balance, January 1	$	11.9		$	—
Transfers (out) of Level 3 ⁽¹⁾	(7.0		)	—
Purchases and sales, net	(0.2		)	4.9
Ending balance, September 30	$	4.7		$	4.9



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
	(in millions)
Net realized gains on investments
Fixed maturity securities
Gross gains	$	3.5		$	—		$	4.0		$	1.3
Gross losses	(0.7		)	—			(0.8		)	(0.5		)
Net realized gains on fixed maturity securities	$	2.8		$	—		$	3.2		$	0.8
Equity securities
Gross gains	$	1.3		$	1.6		$	4.4		$	14.3
Gross losses	—			—			(0.2		)	(6.0		)
Net realized gains on equity securities	$	1.3		$	1.6		$	4.2		$	8.3
Total	$	4.1		$	1.6		$	7.4		$	9.1

Change in net unrealized gains
Fixed maturity securities	$	(1.9	)	$	(10.2	)	$	17.0		$	43.4
Equity securities	2.4			2.1			7.8			8.9
Total	$	0.5		$	(8.1	)	$	24.8		$	52.3



	Number Awarded	Weighted Average Fair Value on Date of Grant		Weighted Average Exercise Price		Aggregate Fair Value on Date of Grant
						(in millions)
March 2017
RSUs⁽¹⁾	72,020	$	37.60	$	—	$	2.7
PSUs⁽²⁾	97,440	37.60		—		3.7

May 2017
RSUs⁽¹⁾	11,888	$	40.35	$	—	$	0.5

July 2017
RSUs⁽¹⁾	1,251	43.95		$	—	$	0.1



	As of September 30, 2017
	Year-to-Date (Decrease) Increase						Year-Over-Year (Decrease) Increase
	Overall		California		All Other States		Overall		California		All Other States
In-force premiums	1.2	%	0.5	%	2.2	%	1.4	%	0.6	%	2.3	%
In-force policy count	1.1		(2.5	)	4.7		0.9		(3.5	)	5.3
Average in-force policy size	0.2		3.1		(2.3	)	0.5		4.3		(2.8	)
In-force payroll exposure	3.0		4.8		2.0		2.9		4.0		2.3



	September 30, 2017			December 31, 2016			September 30, 2016			December 31, 2015
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	$	349.9	41,051	$	348.3	42,120	$	347.8	42,550	$	352.2	44,080
Florida	40.0		5,611	35.2		5,263	33.3		5,154	29.4		4,735
Illinois	28.7		3,005	30.6		3,106	30.9		3,197	32.5		3,286
Other (33 states and D.C.)	207.7		36,073	204.5		34,333	205.9		34,099	205.4		32,395
Total	$	626.3	85,740	$	618.6	84,822	$	617.9	85,000	$	619.5	84,496



	Payment Due By Period
	Total		Less Than 1-Year		1-3 Years		4-5 Years		More Than 5 Years
	(in millions)
Operating leases	$	27.4	$	4.7	$	9.3	$	5.0	$	8.4
Purchase obligations	3.8		2.7		0.9		0.2		—
Notes payable⁽¹⁾	38.5		1.1		2.2		2.2		33.0
Capital leases	0.9		0.3		0.4		0.2		—
Losses and LAE reserves ⁽²⁾⁽³⁾	2,298.9		394.9		489.5		284.6		1,129.9
Total contractual obligations	$	2,369.5	$	403.7	$	502.3	$	292.2	$	1,171.3



	Recoveries Due By Period
	Total			Less Than 1-Year			1-3 Years			4-5 Years			More Than 5 Years
	(in millions)
Reinsurance recoverables for unpaid losses and LAE	$	(553.1	)	$	(29.7	)	$	(56.4	)	$	(52.7	)	$	(414.3	)



Period	Total Number of Shares Purchased	Average Price Paid Per Share⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet be Purchased Under the Program⁽²⁾
					(in millions)
July 1 – July 31, 2017	—	$	—	—	$	28.9
August 1 – August 31, 2017	—	—		—	28.9
September 1 – September 30, 2017	—	—		—	28.9
Total	—	$	—	—