2023 Annual Report

Company Summary

Employers Holdings, Inc. is the only nationwide insurance company exclusively focused on providing workers' compensation. Having been in the workers' compensation business for 110 years, we believe our deep expertise and commitment to this line of insurance is a significant competitive advantage. Market and economic conditions can change quickly, and we are uniquely positioned to understand and react to the impact on our business and the low-to-medium hazard industries we insure.

Our overall strategy is to pursue profitable growth opportunities across workers' compensation insurance market cycles, provide a seamless end-to-end customer experience, maximize our investment returns within the constraints of prudent portfolio management, maintain a strong equity capital position, and deliver value to our shareholders, all while being conscious of environmental, social and governance concerns.

Our critical stakeholders include agents, policyholders and injured workers, and we strive to provide a best-in-class experience tailored to their individual needs. We recently expanded our online portal which provides easy access to policy and claims information to agents and policyholders. In addition, our policyholders can purchase our product at their convenience via an array of distribution channels, including traditional independent agents and brokers, payroll providers, aggregators, digital agents, partner insurance companies, and affinity groups.

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2023 Overview

2023 was an excellent year for EMPLOYERS. We experienced strong revenue growth driven by increases in premium writings, net investment income and net investment gains.

Our key accomplishments in 2023, included the following:

• Our ending policies in-force were 126,409, the highest in our history;
• We achieved a combined ratio of 95%, or 96% excluding the effects of the LPT;
• We wrote $761 million of net written premium, the highest in our history;
• Our investment portfolio generated net investment income of $107 million, the highest in our history;
• Our net income and net income per diluted share increased by 144% and 154%, respectively, versus that of a year ago;
• Our adjusted net income and adjusted net income per diluted share increased by 26% and 31%, respectively, versus that of a year ago; and
• We returned $107 million to stockholders through a combination of share repurchases and regular quarterly dividends.

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Underwriting Activities

Our net premiums written were up 8% in 2023 versus those of a year ago. This growth resulted from a 20% increase in new business, a 9% increase in renewal business and strong audit premium recognition. The increase in new business resulted in part from our continued appetite expansion efforts. We also increased our final audit premium accruals by $4.1 million and recognized $29.2 million of audit premium pick-up, as our payroll exposure increased with U.S. labor market strengthening and rising wages for the businesses that we insure.

We continued our underwriting discipline and maintained our current accident year loss and loss adjustment expense ratio on voluntary business at 63.3%, which was lower than the 64.0% we recorded throughout 2022. In addition, we reduced our loss and loss adjustment expense reserves for prior accident years by $45 million, which primarily related to accident years 2020 and prior.

Our combined ratio excluding the impact of the LPT was 96.0% in 2023, versus 98.1% a year ago. The improvement in our combined ratio was primarily the result of a lower loss and loss adjustment expense ratio excluding the LPT

of 57.2%, versus 59.1% a year ago. Our commission and underwriting and general and administrative expense ratios of 13.9% and 24.9%, respectively, were each highly consistent with those of a year ago.

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Investing Activities

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

As of December 31, 2023, the fair value of our investment portfolio, including cash and cash equivalents, was $2.5 billion, or 2.3 times our ending stockholders' equity. Our $2.0 billion portfolio of fixed income investments provides us with a steady source of income and liquidity and is managed by investment professionals that are signatories to the United Nations Principles for Responsible Investment Group, an independent non-profit organization that encourages investors to use responsible and sustainable investment practices to enhance returns and better manage risk.

Our investment portfolio was allocated as follows at December 31, 2023:

Asset Allocation

50%

40%

30%

20%

10%

0%

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Our fixed maturity investments had a duration of 4.5 at December 31, 2023. Our investment strategy balances the consideration of duration, yield and credit risk. We continually monitor changes in interest rates and their impact on our liquidity and ability to meet our obligations. We also had a $309 million portfolio of equity securities and other investments at December 31, 2023. We strive to limit our exposure to equity price risk by diversifying our public holdings across several industry sectors and by investing in private equity limited partnerships.

Our net investment income increased 19% in 2023 versus that of a year ago. The increase was primarily due to higher average bond yields, partially offset by lower invested balances of fixed maturity securities and short- term investments, as measured by amortized cost. The average pre-tax ending book yield on our invested assets was 4.3% at December 31, 2023, up from 3.9% a year ago.

Volatility in market interest rates and a favorable equity market in 2023 favorably impacted the fair value of our investment securities. Specifically, our net income in 2023 benefited from $24 million of net unrealized gains (after tax) arising from equity securities and other investments and our stockholders' equity benefitted from $47 million of net unrealized gains (after tax) from fixed maturity securities.

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Cerity Integration

We recently announced the completion of an ambitious full-integration of Cerity's operations into our mainstream operations. The integration allows us to continue to offer direct-to-consumer policies through the Cerity brand, and we expect to realize meaningful fixed underwriting expense savings going forward. We also eliminated the former Cerity segment from our financial reporting, returning to single-segment reporting.

Medical Inflation

With regard to inflation, the workers' compensation industry is better prepared than in the past to combat the impact of medical inflation should it arise. Over the last decade, states have implemented physician fee schedules, hospital inpatient and outpatient fee schedules, prescription drug formularies and other protections to control medical costs. These measures have continued to be highly effective.

Nonetheless, under the current elevated inflationary environment, additional inflationary considerations were included in determining the level and adequacy of our loss and loss adjustment expense reserves at December 31, 2023, and particular consideration was given to medical and hospital inflation rates as these rates have historically exceeded general inflation rates.

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