Employers 8K Regulation FD Disclosure | EIG 4 Jun 07

Management Presentation

June 2007

Safe Harbor Disclosure

This slide presentation is for informational purposes only. It should be read in conjunction with our Form 10-K for the year 2006, our Form
10-Q for the first quarter 2007 and our Form 8-Ks filed with the Securities and Exchange Commission (SEC) and available in the “Investor
Relations” section of our website at www.employers.com.

Non-GAAP Financial Measures

In presenting Employers Holdings, Inc.’s (EMPLOYERS^SM) results, management has included and discussed certain non-GAAP financial
measures, as defined in Regulation G.  Management believes these non-GAAP measures better explain EMPLOYERS results allowing for a
more complete understanding of underlying trends in our business.  These measures should not be viewed as a substitute for those
determined in accordance with GAAP.  The reconciliation of these measures to their most comparable GAAP financial measures is included
in this presentation or in our Form 10-K for the year 2006, our Form 10-Q for the first quarter 2007 and our Form 8-Ks filed with the
Securities and Exchange Commission (SEC) and available in the “Investor Relations” section of our website at www.employers.com.

Forward-looking Statements

This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements regarding anticipated future results and can be identified by the fact that they do not relate
strictly to historical or current facts. They often include words like "believe”, "expect”, "anticipate”, "estimate" and "intend" or future or
conditional verbs such as "will”, "would”, "should”, "could" or "may”. Certain factors that could cause actual results to differ materially from
expected results include increased competitive pressures, changes in the interest rate environment, general economic conditions, and
legislative and regulatory changes that could adversely affect the business of EMPLOYERS and its subsidiaries. All subsequent written and
oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by these
cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

EMPLOYERS is a service mark and trade name for a group of companies which provides workers’ compensation insurance and services. Insurance is
offered through Employers Compensation Insurance Company, except in Nevada, where insurance is offered through Employers Insurance Company of
Nevada. Employers Compensation Insurance Company does not do business in all jurisdictions. For more information please visit www.employers.com.

California Rate Setting Process

California Rates and Rate Setting

Customer Selection

Insurance Operations Summary

Workers’ Compensation Industry

Policy Count

Strategic Distribution Partners

Focused Marketing and Distribution

Focus on Low to Medium Hazard Groups

Disciplined Underwriting – Five Basic Elements

Insurance Operations

History

Seasoned Executives with Extensive Experience

Expanding Geographic Footprint

Strategies

Financial Snapshot

Key Strengths

Overview

Corporate Overview

Capital Management

Selected Operating Results

31 - 33

SUMMARY

Investment Portfolio

Reinsurance Program

Underwriting Profitability

Earnings and EPS

Loss Portfolio Transfer

Four Key Elements of our Financial Strength

Financial Results

Page

Contents

Corporate Overview

Overview

Business

Specialty provider of workers’ compensation insurance

18^th largest private writer in the U.S. ⁽¹⁾

8^th largest private writer in California ⁽¹⁾

2^nd largest writer in Nevada ⁽¹⁾

Geographic

Focused in Western U.S. – direct premiums written in the first quarter of 2007

66% in California

25% in Nevada

9% in nine other states

Customers

Small businesses in low to medium hazard industries

Distribution through independent agents and strategic partners

30,922 policies in force at 3/31/2007

Average annual policy premium of approximately $11,000

(1) Based on “One-Year Premium and Loss Study,” U.S., California and Nevada, A.M. Best Company, 2006

Key Strengths

Established enterprise with 94 year operating history

Focused operations and disciplined underwriting – target an attractive
and underserved market segment with growth opportunities

Unique and long-standing strategic distribution relationships

Financial strength and flexibility - strong balance sheet and conservative
reserving

Experienced management team with deep knowledge of workers’
compensation

To be the leader in
workers’
compensation for
small businesses

History

(1) EICN = Employers Insurance Company of Nevada; the Fund = Nevada State Workers Compensation Fund

State Workers
Compensation Fund
established in
Nevada

Demutualization
and IPO

Entry into California
Market

Goal:

2000

2007

2002

1913

EICN Assumed Assets,
Liabilities and Operations
of the Fund ⁽¹⁾

2005

Conversion to
Mutual Holding
Company

Financial Snapshot

Net Premium Written

Net Income Before Loss Portfolio Transfer (LPT)

Equity Incl. Deferred Gain - LPT

Statutory Surplus

($ million)

Premium growth has reversed due to California rate
decreases

Strong growth provides a solid basis for underwriting

Loss trends and investments are driving net income

Capital management plans include dividends and
share repurchases

Strategies

Focus on
Profitability

Pursue
Organic
Growth
Opportunities

Optimize
Capital
Structure

Consider opportunistic strategic transactions

•

Return capital to shareholders

•

Invest in operations and manage capital prudently

•

Utilize existing and new strategic distribution partners

•

Leverage infrastructure, technology and systems

•

Expand in current markets and in our new states

•

Maintain disciplined risk selection, underwriting and
pricing

•

Target attractive, underserved small business market

•

Expanding Geographic Footprint

2000

2002

2006

2007

NEW STATES

Florida, Oregon,
Texas, Arizona
and Illinois = 0.8%

Direct Premiums Written (%), First Quarter, 2007

Seasoned Executives with Extensive Experience

EVP, Chief Financial Officer

William E. Yocke

SVP, Chief Underwriting Officer

Jeff J. Gans

SVP, Chief Claims Officer

Stephen V. Festa

SVP, President of Western Region

George Tway

SVP, President of Strategic Markets Region

David M. Quezada

SVP, President of Pacific Region

T. Hale Johnston

President and Chief Operating Officer

Martin J. Welch

Chief Executive Officer

Douglas D. Dirks

Experience
(Years)

Title

Name

Average experience of senior operating leadership = 24 years

Insurance Operations

Disciplined Underwriting

37.9% statutory loss and LAE ratio in 2006

Risk Selection
Expertise

Strong
Underwriting
Culture

Focused
Guidelines and
Consistent
Automated
Approach

Disciplined
Underwriting

Local Knowledge

Pricing of
Individual Risks

Five Basic Elements

Focus on Low to Medium Hazard Groups

EMPLOYERS

Focus on low to medium hazard risks allows us to optimize risk selection and pricing adequacy

Hazard Group A

Industry ⁽¹⁾

% of Premiums Written, 12/31/2006

Hazard Group B

Hazard Group C

Hazard Group D

Hazard Group E

Hazard Group F

Hazard Group G

Hazard Groups A through D

Lower
Risk

Higher
Risk

(1) NCCI 2006 Premium Distribution by Hazard Group (as presented at 2007 Annual Issues Symposium).

Industry = 56%

EMPLOYERS = 82%

Customer Selection

35.1%

$136,883

Top 10

1.7

6,458

Automobile

2.0

7,939

Dentists & Dental Surgeons & Clerical

2.3

9,040

Clothing Manufacturers

2.4

9,455

Machine Shops

2.5

9,846

Clerical Office Employees

2.9

11,189

Store: Retail

3.0

11,590

College: Professional Employees & Clerical

4.8

18,854

Store: Wholesale

6.4

24,858

Physicians & Clerical

7.1%

$ 27,654

Restaurants

Percent of
Total

Direct Premiums

Written (000s)

Class

Hazard
Group

EMPLOYERS further differentiates risks within industry-defined customer classes

Top Ten Classes in 2006

Focused Marketing and Distribution

Independent Agents and Brokers

PACIFIC REGION

California

In 2006, 44% of direct
premiums written

STRATEGIC REGION

Largely ADP & Wellpoint;
added E-CHX in Qtr 4, 2006

Primarily California today

In 2006, 30% of direct premiums
written

Three strategic business units target consistent customer segments with a focused
underwriting approach

WESTERN REGION

Nevada, Colorado, Utah,
Montana, Idaho, Texas,
Arizona, Illinois, Oregon,
Florida

In 2006, 26% of direct
premiums written

Strategic Distribution Partners

Strategic Distribution Partners

Largest payroll services company in the
U.S. with over 450,000 clients

Partner since entering California market
in 2002

Business originated by ADP’s field sales
staff and insurance agency

“Pay-by-Pay” premium collection

Strategic partners expand market reach and produce business with high persistency

Largest group health carrier in California

Partner since entering California market
in 2002

Business originated by Wellpoint’s health
insurance agents

Single bill to customers

Solid in force policy count growth
continued in the first quarter, 2007

30,922 at 3/31/2007

27,934 at 3/31/2006

Total increase of 2,988 or
10.7%

In Force Policy Count

Total in force policy count has grown consistently with a 2002 – 2006 CAGR of 6%

Workers’ Compensation Industry

Historical Pure Loss Ratio

California

Total U.S.

Source: WCIRB as of 09/30/06 (California); Insurance Information Institute as of 12/31/05 (Total U.S.)

2002: Employers entry
into California

California Rates and Rate Setting

-14.2%

Recommended
Effective-July 1, 2007

- 9.5%

January 1, 2007

-65.1%

Cumulative Change

-16.4%

July 1, 2006

-15.3%

January 1, 2006

-18.0%

July 1, 2005

- 2.2%

January 1, 2005

- 7.0%

July 1, 2004

-14.9%

January 1, 2004

Recent Commissioner Approved
Pure Premium Rate Changes

Workers’ Compensation Insurance Rating Bureau
(WCIRB) recommended decrease of 11.3%

Insurance Commissioner recommended decrease of
14.2%

Company’s choice to implement rate changes

Internal analyses are compared to Bureau’s view of the
industry to confirm actual experience

Filed loss cost multipliers (LCMs) account for loss
adjustment, underwriting and commission expenses and
targeted unlevered return of 12% to 13%

Rate deviation plans modify full premium rates based on
individual or group risk characteristics to yield “effective
rates”

At this time, EMPLOYERS will file no change in rates in
California and will continue to evaluate the market

Key Issues

California Rate Setting Process

Filed Loss Costs Estimate

Effective Rates

-5

Schedule Credits

100

Revised Filed Rates

166%

X LCM

Revised Loss Costs
Estimate

-7.5%

+ or – adjustment

Rate Setting Process Example

Key Terms: Loss Costs (losses only; also referred to as
pure premium); Lost Cost Multiplier (LCM); Filed Rate;
Schedule Credit/Debit; Effective Rate

WCIRB recommendations to the Commissioner are based
on study of approximately 86% of the industry “ loss
costs”

- Annually by class of business

- Interim studies in aggregate

Commissioner can accept, reject or modify WCIRB
findings

Companies then accept, reject or modify the
Commissioner’s recommendations; if they accept or
modify they file new rates that are the product of revised
pure loss cost estimates X LCM’s required to cover their
total costs by class of business

Companies also file rate deviation plans or schedule
credits

These schedule credits are applied to modify filed rates
to individual policy or group requirements to arrive at
“effective rates”

High performing insurance operation, built upon four key
elements

A highly focused customer base

A disciplined underwriting culture

An efficient -- and scalable – infrastructure

Strong producer and strategic partner relationships, providing us
with:

broader access to markets

enhanced value delivery to our customers

more cost effective production

Insurance Operations Summary

Financial Results

Four Key Elements of Our Financial Strength

Surplus of
$640MM

at 12/31/2006

Conservative
Reserving

High Quality
Investment
Portfolio

Catastrophe
Reinsurance
Program

0.6:1 NPW / Surplus
at 12/31/2006

Over 90% fixed maturity
with average rating AA

Coverage up to
$175MM loss

Track record of
reserve strength

Loss Portfolio Transfer (LPT)

$ millions

602.5

Gain at 3/31/2007

(147.5)

Subsequent Reserve Adjustments

750

Gain at 1/1/2000

775

Consideration

$1,525

Original Reserves Transferred

$2,000

Total Coverage

Contract

$ millions

438.5

GAAP: Deferred Reinsurance
Gain – LPT Agreement

(164.0)

Cumulative Amortization To Date

$602.5

Statutory Surplus Created

Accounting at 3/31/2007

Non-recurring transaction with no ongoing cash benefits or charges to current operations

Retroactive 100% quota share reinsurance coverage for all losses occurring prior to 7/1/95

Gain on transaction booked as statutory surplus; deferred and amortized under GAAP

Selected Operating Results

746.8

303.8

2,307.8

3,195.7

80.0

1,715.7

152.2

171.6

68.2

393.0

387.2

$ 401.8

13.4

18.1

15.7

103.3

113.4

$ 117.1

352.0

144.6

Shareholders’ equity

Balance Sheet Data

1,768.6

1,595.8

Total investments

66.5

61.1

Cash and cash equivalents

3,221.2

3,094.2

Total assets

2,307.2

2,350.0

Reserves for loss & LAE

790.4

607.0

Equity including LPT deferred gain

27.9

137.6

Net Income

23.3

93.8

Net Income Before LPT

20.8

54.4

Net Investment Income

89.8

438.3

Net Earned Premium

93.2

439.7

Net Written Premium

$ 96.5

$ 458.7

Gross Written Premium

Income Statement Data

$ million

December 31

2005 2006

First Quarter

2006 2007

Premiums are declining due to
California rate decreases

While premiums have declined in
California, losses have also
declined

Loss trends and investments are
driving net income

Portfolio reallocation (equity sales)
in the fourth quarter of 2006
reduced volatility and increased
investment income

Earnings and EPS

First Quarter

December 31

52,155,944

50,000,002

Weighted Average Shares Outstanding, pro forma ⁽²⁾

$ .45

$ .27

EPS Before Impacts of the LPT, pro forma ⁽²⁾

.08

$ .53

N/A

23.3

(4.6)

$27.9

2007

.40

EPS for the period Feb. 5 through March 31, 2007

$3.43

$2.75

GAAP Pro forma EPS – assuming conversion ⁽¹⁾

3.04

1.88

EPS (Net Income Before LPT) – assuming conversion ⁽¹⁾

.09

EPS attributable to LPT ⁽²⁾

$ .36

EPS for three months ended 3/31/2007, pro forma ⁽²⁾

$18.1

$171.6

$137.6

Net Income

(4.7)

(19.4)

(43.8)

Less: LPT Deferred Gain Amortization

13.4

152.2

93.8

Net Income Before LPT

2006

2005

$ million, except per share data

(1)

Based on 50,000,002 shares assumed outstanding before the conversion.

(2)

Pro forma EPS computed using the actual weighted average shares outstanding as of 3/31/2007. This includes shares outstanding for the period after the Company’s
conversion on 2/5/2007 (53,527,907) and prior to the conversion (50,000,002).

Underwriting Profitability

$6.3

99.3%

18.7%

11.9%

68.7%

4.6%

64.1%

$15.6

$107.1

$78.1

Favorable Reserve Development ($
million)

90.5%

25.9%

13.1%

51.5%

5.1%

46.4%

107.9%

72.6%

84.9%

Combined Ratio (excl. LPT)

25.9%

22.3%

16.0%

Underwriting & Other Expense Ratio ⁽³⁾

13.1%

12.3%

10.7%

Commission Expense Ratio ⁽³⁾

68.9%

37.9%

58.3%

Loss & LAE Ratio (excl. LPT)

5.1%

4.9%

10.0%

Less: Impact of LPT ⁽²⁾

63.8%

33.0%

48.3%

Loss & LAE Ratio

Excluding Qtr. 1,
2007 Reserve
Development (1)

COMBINED RATIO

(GAAP and excluding the LPT)

(1)

Excluding $15.6 million of favorable development, our loss ratio would have been 68.9% and our combined ratio would have been 107.9%. We target a combined
ratio of 100. The total combined ratio includes three items causing upward pressure: (1) one shock loss requiring additional reserves that may run in excess of
$3.5 million; (2) one-time conversion costs of nearly $1 million; and (3) decreasing earned premium.

(2)

Total deferred gain amortization and LPT reserve adjustment of $43.8 million in 2005, $19.4 million in 2006 and $4.6 million in the first quarter of 2007.

(3)

Our higher expense ratio is largely a function of falling California rates.

First Quarter

2006 2007

December 31

2005 2006