Eastern Insurance Holdings Inc. (EIHI) filed Quarterly Report for the period ended 2009-09-30.
EASTERN INSURANCE HOLDINGS INC. is a holding company that through its subsidiaries offers insurance and reinsurance products and services to business and organizations. At EIHI they win with integrity for the benefit of their loyal employees shareholders agents brokers policyholders and their own employees. They win by bringing fresh perspectives to the market place and the work place that clearly differentiates them as a uniquely progressive insurer and employer. EIHI owns and operates Eastern Alliance Insurance Group Eastern Life and Health Insurance Company Employers Alliance Inc. and Eastern Re Ltd. S.P.C. Eastern Insurance Holdings Inc. has a market cap of $66.8 million; its shares were traded at around $6.89 with a P/E ratio of 6.9 and P/S ratio of 0.5. The dividend yield of Eastern Insurance Holdings Inc. stocks is 4.1%.
Highlight of Business Operations:
The Company reported net income of $3.3 million for the three months ended September 30, 2009, compared to a net loss of $3.1 million for the same period in 2008. The Company’s 2009 results of operations primarily reflect the improvement in the investment markets. Net realized investment gains were positively impact by an increase in the Company’s convertible bond portfolio of $1.7 million in the third quarter of 2009, compared to a decline in fair value of $1.3 million for the same period in 2008. The Company’s equity interest in limited partnerships also increased from 2008 to 2009 reflecting the improving investment markets. The 2008 equity interest in limited partnerships includes an impairment of $1.4 million related to a limited partnership interest that was placed in liquidation during the third quarter of 2008. For the three months ended September 30, 2009, the Company recognized other-than-temporary investment impairments related to its fixed income and equity security portfolio totaling $439,000, compared to impairments of $2.8 million for the same period in 2008.
The group benefits insurance segment reported net income of $911,000 for the three months ended September 30, 2009, compared to a net loss of $1.1 million for the same period in 2008. The segment’s 2009 operating results were positively impacted by the investment markets, specifically as it relates to its convertible bond portfolio. The segment’s combined ratio was 105.1% for the three months ended September 30, 2009, compared to a combined ratio of 95.7% for the same period in 2008. The increase in the combined ratio reflects the continued impact of the rising dental loss ratio on the segment’s operating results. The segment continues to experience a competitive rate environment, which has continued to negatively impact the dental loss ratio. The current rate environment, as well as the current economic environment, has also negatively impacted the segment’s renewal retention rate, which has resulted in a decline in net premiums earned from 2008 to 2009.
The Company discounts its workers’ compensation reserves, using a discount rate of approximately 3.0%. As of September 30, 2009 and December 31, 2008, the Company’s reserves for unpaid losses and LAE were reduced by $4,330 and $4,145, respectively, related to the effects of discounting.
Unrealized investment gains or losses on investments carried at fair value, net of applicable income taxes, are reflected directly in shareholders’ equity as a component of comprehensive income (loss) and, accordingly, have no effect on net income. When, in the opinion of management, a decline in the fair value of an investment below its cost or amortized cost is considered to be “other-than-temporary,” such investment is written down to its fair value. The amount written down is recorded in earnings as a realized loss on investments. Generally, the determination of other-than-temporary impairment includes, in addition to other relevant factors, a presumption that if the market value is below cost by a significant amount for a period of time, a write down is necessary. Notwithstanding this presumption, the determination of other-than-temporary impairment requires judgment about future prospects for an investment and is therefore a matter of inherent uncertainty. For the three and nine months ended September 30, 2009, the Company recognized other-than-temporary impairments of $439,000 and $4.4 million, respectively, compared to impairments of $4.2 million for the same periods in 2008. As of September 30, 2009, the Company held securities with gross unrealized losses of $1.6 million, excluding those securities in the segregated portfolio cell reinsurance segment, of which $860,000 were in an unrealized loss position for more than 12 months. Adverse investment market conditions, poor operating results of underlying investments, or the passage of time with respect to equity securities in an unrealized loss position, could result in impairment charges in the future. The Company generally applies the following standards in determining whether the decline in fair value of an investment is other-than-temporary:
For the three and nine months ended September 30, 2009, the Company recognized other-than-temporary impairments of $409,000 and $4.2 million related to its equity security portfolio, respectively.
For the three and nine months ended September 30, 2009, the Company recognized other-than-temporary impairments of $29,000 and $188,000, respectively, related to its fixed income security portfolio.
EIHI is in the portfolios of John Keeley of Keeley Fund Management.
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