Financial Analysis

Financing Arrangements Credit Agreement On May 28, 2024, EHI entered into the Credit Agreement with Wells Fargo Bank, National Association, as both administrative agent and issuing lender. The Credit Agreement provides for a $25.0 million unsecured, three-year revolving credit facility and is guaranteed by certain of EHIs wholly owned subsidiaries, Employers Group, Inc. (EGI) and Cerity Group, Inc. (CGI). On July 29, 2026, EHI and Wells Fargo Bank, National Association, entered into Amendment No. 1 to the Credit Agreement. The Credit Agreement provides for a $35.0 million, unsecured, three-year revolving credit facility and remains guaranteed by EGI and CGI (see Note 15). Borrowings under the Credit Agreement may be used for working capital and general corporate purposes of EHI and its subsidiaries. The interest rates applicable to loans under the Credit Agreement are generally based on either, at EHI's option: (i) a base rate, defined as the higher of the Prime Rate, the Federal Funds Rate plus 0.50% and the Adjusted Term SOFR for a one-month tenor plus 1.00%, or (ii) an Adjusted Term SOFR, defined as the applicable Adjusted Term SOFR, plus 1.50%. In addition, EHI is subject to a fee on the lenders unused commitment, ranging from 0.30% to 0.55%. The applicable margin and the amount of such commitment fee vary based upon the financial strength rating of EHIs insurance subsidiaries as most recently announced by AM Best or EHIs debt to total capitalization ratio if such financi …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

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) March 2026 RSUs (1) 77,300 $ 39.71 $ 3.1 PSUs (2) 100,020 39.71 4.0 May 2026 RSUs (3) 7,824 41.92 0.3 RSUs (4) 15,372 43.26 0.7 (1) These RSUs were awarded to certain employees of the Company and vest 25% on March 15, 2027 and each of the subsequent three anniversaries of that date. (2) These PSUs were awarded to certain employees of the Company and have a performance period of three years. The PSU awards are subject to certain performance goals with payouts that range from 0% to 200% of the target awards. The value shown in the table represents the aggregate number of PSUs awarded at the target level. (3) These RSUs were awarded to certain employees of the Company and vest 25% on May 15, 2027 and each of the subsequent three anniversaries of that date. (4) All RSUs awarded on this date were awarded to non-employee directors of the Company and vest in full on May 28, 2027. Employees who 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, dividend equivalents with respect to the underlying award fail to become payab …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Valuation of Financial Instruments Financial Instruments Carried at Fair Value The carrying value and the estimated fair value of the Companys financial instruments at fair value were as follows: June 30, 2026 December 31, 2025 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value (in millions) Financial assets Total investments at fair value $ 2,231.1 $ 2,231.1 $ 2,234.8 $ 2,234.8 Cash and cash equivalents 113.3 113.3 159.8 159.8 Restricted cash and cash equivalents 0.2 0.2 0.2 0.2 Financial liabilities Credit agreement (Note 10) $ 20.0 $ 20.0 $ $ FHLB advances (Note 10) 105.0 103.5 35.0 35.0 Assets and liabilities recorded at fair value on the Companys 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 managements 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 secu …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

Income Taxes The Company's income tax expense was $5.6 million and $8.2 million for the three and six months ended June 30, 2026, respectively, and $7.3 million and $10.4 million for the three and six months ended June 30, 2025, respectively. The Companys effective tax rate was 16.1% and 17.3% for the three and six months ended June 30, 2026, respectively, and 19.7% for each of the three and six months ended June 30, 2025. The effective rates during each of the periods presented deviate favorably from the statutory rate of 21.0% due to, in part, income tax benefits and exclusions associated with tax-advantaged investment income, LPT adjustments, Deferred Gain amortization and related adjustments, income adjustments related to the Fund, and tax credits utilized. The Company is subject to a 1% excise tax on net stock repurchases. The Company's cumulative excise tax obligation was $3.8 million and $2.8 million as of June 30, 2026 and December 31, 2025, respectively, which is included in Treasury stock on its Consolidated Balance Sheets. …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Segment Reporting The Company operates as a single reportable segment, Insurance Operations , providing workers' compensation insurance through its wholly owned subsidiaries. The segment represents the Company's traditional business offered through its agents, including business originated from its strategic partnerships and alliances, and its direct-to-customer business. Revenues for the Insurance Operations segment are generated primarily from earned workers' compensation premiums, investment income, and realized and unrealized gains (losses) on investments. The Company does not have intra-entity sales or transfers. The Company considers an operating segment to be any component of its business whose operating results are regularly reviewed by the CODM (the Company's President and Chief Executive Officer) to make key decisions about resources to be allocated and to assess its performance. Performance is determined based on multiple measures, including net income, the Companys combined ratio, and the Companys adjusted stockholders' equity. Net income, which is reported on the Company's Consolidated Statements of Comprehensive Income (Loss), is a comprehensive measure used to determine the Companys overall profitability. The combined ratio, which is a widely-used measure in the property and casualty insurance industry, is used to determine whether the Company is generating an underwriting profit or loss. Adjusted stockholders' equity, a non-GAAP measure of financial strength a …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

15. Subsequent Event On May 28, 2024, EHI entered into the Credit Agreement, which provided for a $25.0 million, unsecured, three-year revolving credit facility and is guaranteed by EGI and CGI. On July 29, 2026, EHI and Wells Fargo Bank, National Association, entered into Amendment No. 1 to the Credit Agreement. The Amendment increases the Credit Agreement to $35.0 million, extends the agreement through July 29, 2029, and remains guaranteed by EGI and CGI. To reflect the Company's recapitalization plan, the Amendment also reduces the minimum consolidated net worth covenant from $800.0 million to $700.0 million and the maximum debt to total capitalization ratio from 35.0% to 27.5%, applicable to fiscal quarters ending after the effective date. All other substantive terms of the Credit Agreement remain unchanged.

SubsequentEventsTextBlock