EIHI » Topics » Financial Position

These excerpts taken from the EIHI 10-K filed Mar 13, 2009.

Financial Position

December 31, 2008 compared to December 31, 2007. Total assets were $377.3 million as of December 31, 2008, compared to $385.5 million as of December 31, 2007. The acquisition of ESHC resulted in an increase to consolidated assets of $26.0 million, including the recognition of goodwill and intangible assets of $2.8 million and $4.2 million, respectively. The increase in consolidated assets related to the acquisition of ESHC was partially offset by a decrease in investments, which reflects the sale of investments to fund the acquisition of ESHC, share repurchases, and the repayment of the junior subordinated debentures, as well as the decrease in the fair value of the Company’s investment portfolio. The increase in deferred income taxes primarily reflects the decrease in the fair value of the Company’s investment portfolio, including the recognition of other-than-temporary impairments.

Total liabilities were $239.2 million as of December 31, 2008, compared to $207.7 million as of December 31, 2007. The acquisition of ESHC resulted in an increase to consolidated liabilities of $18.7 million. In addition to the acquired ESHC liabilities, reserves for losses and LAE increased primarily as a result of the unfavorable loss reserve development in the run-off specialty reinsurance segment. These increases were partially offset by the repayment of the junior subordinated debentures.

Total shareholders’ equity was $138.1 million as of December 31, 2008, compared to $177.8 million as of December 31, 2007. The decrease primarily reflects the net loss of $17.4 million, stock repurchases of $17.1 million, shareholder dividends of $2.5 million, and a decline in the market value of the Company’s investments of $4.1 million.

Financial Position

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">December 31, 2008 compared to December 31, 2007. Total assets were $377.3 million as of December 31, 2008, compared to $385.5
million as of December 31, 2007. The acquisition of ESHC resulted in an increase to consolidated assets of $26.0 million, including the recognition of goodwill and intangible assets of $2.8 million and $4.2 million, respectively. The
increase in consolidated assets related to the acquisition of ESHC was partially offset by a decrease in investments, which reflects the sale of investments to fund the acquisition of ESHC, share repurchases, and the repayment of the junior
subordinated debentures, as well as the decrease in the fair value of the Company’s investment portfolio. The increase in deferred income taxes primarily reflects the decrease in the fair value of the Company’s investment portfolio,
including the recognition of other-than-temporary impairments.

Total liabilities were $239.2 million as of December 31, 2008,
compared to $207.7 million as of December 31, 2007. The acquisition of ESHC resulted in an increase to consolidated liabilities of $18.7 million. In addition to the acquired ESHC liabilities, reserves for losses and LAE increased primarily
as a result of the unfavorable loss reserve development in the run-off specialty reinsurance segment. These increases were partially offset by the repayment of the junior subordinated debentures.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Total shareholders’ equity was $138.1 million as of December 31, 2008, compared to $177.8 million as of December 31, 2007. The decrease
primarily reflects the net loss of $17.4 million, stock repurchases of $17.1 million, shareholder dividends of $2.5 million, and a decline in the market value of the Company’s investments of $4.1 million.

STYLE="margin-top:18px;margin-bottom:0px">Liquidity and Capital Resources

Liquidity is a
measure of an entity’s ability to secure sufficient cash to meet its contractual obligations and operating needs. The Company’s principal sources of funds are premiums, investment income and proceeds from sales and maturities of
investments. The Company’s primary use of funds is to pay claims and operating expenses and to purchase investments. The Company’s investment portfolio is structured so that investments mature periodically over time in reasonable relation
to current expectations of future claim payments. The Company’s investment portfolio as of December 31, 2008 had an effective duration of 2.66 years.

FACE="Times New Roman" SIZE="2">For the years ended December 31, 2008, 2007 and 2006, the Company’s cash inflows from premiums and investment activity were sufficient to support the Company’s cash outflows related to claims and
operating expenses. Management expects future cash flows from operations in its workers’ compensation insurance, segregated portfolio cell reinsurance and group benefits insurance segments to be sufficient to cover claims and operating
expenses. However, in the event cash flows from operations are not sufficient, the Company may have to liquidate investments to cover such costs. As of December 31, 2008, the Company’s investment portfolio included securities with gross
unrealized gains totaling $6.4 million; therefore, based on current gross unrealized gains in the investment portfolio as of December 31, 2008, management does not believe it would have to sell securities at a loss in the event cash flows from
operations proved insufficient to cover the Company’s operating needs.

As a result of the significant losses in the run-off specialty
reinsurance segment for the year ended December 31, 2008, Eastern Re’s shareholder’s equity was reduced to $(2.6) million as of December 31, 2008. On March 6, 2009, EIHI made a capital contribution of $23.0 million to
improve Eastern Re’s capital position and to maintain Eastern Re’s current A.M. Best financial strength rating of “A-” (Excellent).

 


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The Company has a $2.6 million line of credit available to provide additional liquidity if needed. In
addition to the line of credit, the Company has obtained letters of credit totaling $44.9 million for the purpose of securing obligations to reinsurers, if necessary. As of December 31, 2008, there was approximately $6.6 million still available
under the Company’s letter of credit facilities.

The Company’s ability to manage liquidity results, in part, from the purchase
of reinsurance to protect the Company against severe claims and catastrophic events. See “Item 1—Business, Reinsurance.”

SIZE="2">Our domestic insurance subsidiaries’ ability to pay dividends to EIHI is limited by the insurance laws and regulations of Pennsylvania and Indiana. The maximum annual dividends that the domestic insurance entities may pay without prior
approval from the Pennsylvania Insurance Department and the Indiana Insurance Department is limited to the greater of 10% of statutory surplus or 100% of statutory net income for the most recently filed annual statement. In addition, EIHI and its
Pennsylvania-domiciled subsidiaries are prohibited from declaring or paying any dividends or other forms of distribution for the three years after June 16, 2006, the effective date of the conversion/merger transaction, without the prior
approval of the Pennsylvania Insurance Commissioner. Eastern Re must receive approval from the Cayman Islands Monetary Authority before it can pay any dividend to the Company.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">The capital contribution from EIHI to Eastern Re was funded by dividends paid to EIHI from Eastern Alliance, Allied Eastern and ELH in the amount of
$10.0 million, $2.0 million and $13.0 million, respectively, on March 6, 2009, of which $2.0 million was retained by EIHI. The dividends were approved by the Pennsylvania Insurance Department and were considered extraordinary in nature.

Financial Position

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">December 31, 2008 compared to December 31, 2007. Total assets were $377.3 million as of December 31, 2008, compared to $385.5
million as of December 31, 2007. The acquisition of ESHC resulted in an increase to consolidated assets of $26.0 million, including the recognition of goodwill and intangible assets of $2.8 million and $4.2 million, respectively. The
increase in consolidated assets related to the acquisition of ESHC was partially offset by a decrease in investments, which reflects the sale of investments to fund the acquisition of ESHC, share repurchases, and the repayment of the junior
subordinated debentures, as well as the decrease in the fair value of the Company’s investment portfolio. The increase in deferred income taxes primarily reflects the decrease in the fair value of the Company’s investment portfolio,
including the recognition of other-than-temporary impairments.

Total liabilities were $239.2 million as of December 31, 2008,
compared to $207.7 million as of December 31, 2007. The acquisition of ESHC resulted in an increase to consolidated liabilities of $18.7 million. In addition to the acquired ESHC liabilities, reserves for losses and LAE increased primarily
as a result of the unfavorable loss reserve development in the run-off specialty reinsurance segment. These increases were partially offset by the repayment of the junior subordinated debentures.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Total shareholders’ equity was $138.1 million as of December 31, 2008, compared to $177.8 million as of December 31, 2007. The decrease
primarily reflects the net loss of $17.4 million, stock repurchases of $17.1 million, shareholder dividends of $2.5 million, and a decline in the market value of the Company’s investments of $4.1 million.

STYLE="margin-top:18px;margin-bottom:0px">Liquidity and Capital Resources

Liquidity is a
measure of an entity’s ability to secure sufficient cash to meet its contractual obligations and operating needs. The Company’s principal sources of funds are premiums, investment income and proceeds from sales and maturities of
investments. The Company’s primary use of funds is to pay claims and operating expenses and to purchase investments. The Company’s investment portfolio is structured so that investments mature periodically over time in reasonable relation
to current expectations of future claim payments. The Company’s investment portfolio as of December 31, 2008 had an effective duration of 2.66 years.

FACE="Times New Roman" SIZE="2">For the years ended December 31, 2008, 2007 and 2006, the Company’s cash inflows from premiums and investment activity were sufficient to support the Company’s cash outflows related to claims and
operating expenses. Management expects future cash flows from operations in its workers’ compensation insurance, segregated portfolio cell reinsurance and group benefits insurance segments to be sufficient to cover claims and operating
expenses. However, in the event cash flows from operations are not sufficient, the Company may have to liquidate investments to cover such costs. As of December 31, 2008, the Company’s investment portfolio included securities with gross
unrealized gains totaling $6.4 million; therefore, based on current gross unrealized gains in the investment portfolio as of December 31, 2008, management does not believe it would have to sell securities at a loss in the event cash flows from
operations proved insufficient to cover the Company’s operating needs.

As a result of the significant losses in the run-off specialty
reinsurance segment for the year ended December 31, 2008, Eastern Re’s shareholder’s equity was reduced to $(2.6) million as of December 31, 2008. On March 6, 2009, EIHI made a capital contribution of $23.0 million to
improve Eastern Re’s capital position and to maintain Eastern Re’s current A.M. Best financial strength rating of “A-” (Excellent).

 


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The Company has a $2.6 million line of credit available to provide additional liquidity if needed. In
addition to the line of credit, the Company has obtained letters of credit totaling $44.9 million for the purpose of securing obligations to reinsurers, if necessary. As of December 31, 2008, there was approximately $6.6 million still available
under the Company’s letter of credit facilities.

The Company’s ability to manage liquidity results, in part, from the purchase
of reinsurance to protect the Company against severe claims and catastrophic events. See “Item 1—Business, Reinsurance.”

SIZE="2">Our domestic insurance subsidiaries’ ability to pay dividends to EIHI is limited by the insurance laws and regulations of Pennsylvania and Indiana. The maximum annual dividends that the domestic insurance entities may pay without prior
approval from the Pennsylvania Insurance Department and the Indiana Insurance Department is limited to the greater of 10% of statutory surplus or 100% of statutory net income for the most recently filed annual statement. In addition, EIHI and its
Pennsylvania-domiciled subsidiaries are prohibited from declaring or paying any dividends or other forms of distribution for the three years after June 16, 2006, the effective date of the conversion/merger transaction, without the prior
approval of the Pennsylvania Insurance Commissioner. Eastern Re must receive approval from the Cayman Islands Monetary Authority before it can pay any dividend to the Company.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">The capital contribution from EIHI to Eastern Re was funded by dividends paid to EIHI from Eastern Alliance, Allied Eastern and ELH in the amount of
$10.0 million, $2.0 million and $13.0 million, respectively, on March 6, 2009, of which $2.0 million was retained by EIHI. The dividends were approved by the Pennsylvania Insurance Department and were considered extraordinary in nature.

This excerpt taken from the EIHI 10-K filed Mar 28, 2008.

Financial Position

December 31, 2007 compared to December 31, 2006. Total assets were $385.5 million as of December 31, 2007, compared to $368.2 million as of December 31, 2006. The increase in total assets primarily reflects an increase in cash and investments, premiums receivable, deferred acquisition costs, and other assets, partially offset by a decrease in the net deferred tax asset. The increase in cash and investments primarily reflects positive cash flows from operations, offset by stock repurchases and shareholder dividends. The increase in premiums receivable reflects higher direct premiums written in 2007, while the increase in deferred acquisition costs primarily reflects the amortization of purchase accounting adjustments of $1.5 million. The increase in other assets primarily reflects an increase in the Company’s equity interest in certain segregated portfolio cells of $974,000 and an increase in the defined benefit pension plan asset of $1.0 million. The decrease in the net deferred tax asset primarily reflects an increase in the estimated fair value of the Company’s fixed income and equity securities and the recording of a deferred tax liability related to the intangible assets acquired.

Total liabilities were $207.7 million as of December 31, 2007, compared to $194.5 million as of December 31, 2006. The increase in total liabilities primarily reflects an increase in reserves for unpaid losses and LAE, unearned premiums and the segregated portfolio cell dividend payable. The increase in reserves primarily reflects the adverse development on prior year reserves in the specialty reinsurance segment. The increase in unearned premiums primarily reflects the amortization of purchase accounting adjustments of $2.8 million and the increase in net premiums written from 2006 to 2007. The increase in the segregated portfolio cell dividend payable primarily reflects the segregated portfolio cell reinsurance segment’s 2007 results of operations.

Total shareholders’ equity was $177.8 million as of December 31, 2007, compared to $173.7 million as of December 31, 2006. The increase in shareholders’ equity primarily reflects 2007 net income of $18.7 million and the change in estimated fair value of fixed income and equity securities of $624,000, offset by the Company’s stock repurchases of $15.6 million and shareholder dividends of $2.2 million.

 

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Table of Contents
These excerpts taken from the EIHI 10-K filed Mar 14, 2008.

Financial Position

December 31, 2007 compared to December 31, 2006. Total assets were $385.5 million as of December 31, 2007, compared to $368.2 million as of December 31, 2006. The increase in total assets primarily reflects an increase in cash and investments, premiums receivable, deferred acquisition costs, and other assets, partially offset by a decrease in the net deferred tax asset. The increase in cash and investments primarily reflects positive cash flows from operations, offset by stock repurchases and shareholder dividends. The increase in premiums receivable reflects higher direct premiums written in 2007, while the increase in deferred acquisition costs primarily reflects the amortization of purchase accounting adjustments of $1.5 million. The increase in other assets primarily reflects an increase in the Company’s equity interest in certain segregated portfolio cells of $974,000 and an increase in the defined benefit pension plan asset of $1.0 million. The decrease in the net deferred tax asset primarily reflects an increase in the estimated fair value of the Company’s fixed income and equity securities and the recording of a deferred tax liability related to the intangible assets acquired.

Total liabilities were $207.7 million as of December 31, 2007, compared to $194.5 million as of December 31, 2006. The increase in total liabilities primarily reflects an increase in reserves for unpaid losses and LAE, unearned premiums and the segregated portfolio cell dividend payable. The increase in reserves primarily reflects the adverse development on prior year reserves in the specialty reinsurance segment. The increase in unearned premiums primarily reflects the amortization of purchase accounting adjustments of $2.8 million and the increase in net premiums written from 2006 to 2007. The increase in the segregated portfolio cell dividend payable primarily reflects the segregated portfolio cell reinsurance segment’s 2007 results of operations.

Total shareholders’ equity was $177.8 million as of December 31, 2007, compared to $173.7 million as of December 31, 2006. The increase in shareholders’ equity primarily reflects 2007 net income of $18.7 million and the change in estimated fair value of fixed income and equity securities of $624,000, offset by the Company’s stock repurchases of $15.6 million and shareholder dividends of $2.2 million.

Financial Position

FACE="Times New Roman" SIZE="2">December 31, 2007 compared to December 31, 2006. Total assets were $385.5 million as of December 31, 2007, compared to $368.2 million as of December 31, 2006. The increase in total assets
primarily reflects an increase in cash and investments, premiums receivable, deferred acquisition costs, and other assets, partially offset by a decrease in the net deferred tax asset. The increase in cash and investments primarily reflects positive
cash flows from operations, offset by stock repurchases and shareholder dividends. The increase in premiums receivable reflects higher direct premiums written in 2007, while the increase in deferred acquisition costs primarily reflects the
amortization of purchase accounting adjustments of $1.5 million. The increase in other assets primarily reflects an increase in the Company’s equity interest in certain segregated portfolio cells of $974,000 and an increase in the defined
benefit pension plan asset of $1.0 million. The decrease in the net deferred tax asset primarily reflects an increase in the estimated fair value of the Company’s fixed income and equity securities and the recording of a deferred tax liability
related to the intangible assets acquired.

Total liabilities were $207.7 million as of December 31, 2007, compared to $194.5 million
as of December 31, 2006. The increase in total liabilities primarily reflects an increase in reserves for unpaid losses and LAE, unearned premiums and the segregated portfolio cell dividend payable. The increase in reserves primarily reflects
the adverse development on prior year reserves in the specialty reinsurance segment. The increase in unearned premiums primarily reflects the amortization of purchase accounting adjustments of $2.8 million and the increase in net premiums written
from 2006 to 2007. The increase in the segregated portfolio cell dividend payable primarily reflects the segregated portfolio cell reinsurance segment’s 2007 results of operations.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Total shareholders’ equity was $177.8 million as of December 31, 2007, compared to $173.7 million as of December 31, 2006. The increase in
shareholders’ equity primarily reflects 2007 net income of $18.7 million and the change in estimated fair value of fixed income and equity securities of $624,000, offset by the Company’s stock repurchases of $15.6 million and shareholder
dividends of $2.2 million.

This excerpt taken from the EIHI 10-K filed Apr 2, 2007.

Financial Position

December 31, 2006 compared to December 31, 2005. Total assets were $368.2 million as of December 31, 2006, compared to $111.2 million as of December 31, 2005. The increase reflects the proceeds from the initial public offering and the acquisition of EHC.

Total liabilities were $194.5 million as of December 31, 2006, compared to $49.1 million as of December 31, 2005. The increase primarily reflects the acquisition of EHC.

Total shareholders’ equity was $173.7 million as of December 31, 2006, compared to $62.1 million as of December 31, 2005. The increase primarily reflects the proceeds from the initial public offering and the acquisition of EHC.

This excerpt taken from the EIHI 10-Q filed Aug 10, 2006.

Financial Position

As of June 16, 2006, total assets were $216.4 million, compared to $190.2 million as of December 31, 2005. The $26.2 million increase was primarily due to the increase in the cash and invested asset base of $13.6 million and an increase in premiums receivable of $8.6 million. The increase in premiums receivable from December 31, 2005 to June 16, 2006 is primarily related to the cyclical nature of EHC’s premium writings and the fact that a significant percentage of EHC’s production is recorded in the first half of its fiscal year.

As of June 16, 2006, total liabilities were $152.2 million, compared with $133.5 million as of December 31, 2005. The $18.7 million increase was primarily due to the growth in unearned premiums. The unearned premium reserves were $42.9 million as of June 16, 2006, compared with $33.9 million as of December 31, 2005. The increase in unearned premium reserves from December 31, 2005 to June 16, 2006 is primarily related to the cyclical nature of EHC’s premium writings and the fact that a significant percentage of EHC’s production is recorded in the first half of the year.

Total shareholders’ equity increased to $64.2 million as of June 16, 2006, from $56.7 million as of December 31, 2005, an increase of $7.5 million, or 13.2%. The increase in shareholders’ equity primarily reflects comprehensive income of $3.0 million for the period from January 1, 2006 to June 16, 2006 and an increase in additional paid in capital related to the exercise of EHC stock options in the amount of $8.0 million, offset by an EHC shareholder dividend declaration of $3.5 million.

This excerpt taken from the EIHI 10-Q filed Jun 12, 2006.

Financial Position

Assets totaled $111.2 million as of March 31, 2006 and December 31, 2005. Cash and investments remained consistent at $82.1 million and $82.3 million, respectively

Liabilities totaled $48.8 million as of March 31, 2006, compared to $49.1 million as of December 31, 2005. Claims payable decreased $592,000, from $2.2 million for the three months ended March 31, 2005 to $1.6 million for the same period in 2006, which primarily reflects a decrease in the reserve for dental claims payable.

Equity totaled $62.4 million as of March 31, 2006, compared to $62.1 million as of December 31, 2005. The increase in equity reflects net income of $695,000, offset by a decrease in the fair value of Educators’ investment portfolio, net of tax, totaling $389,000.

 

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"Financial Position" elsewhere:

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