EICN, A Mutual Company, and Fremont Employers Insurance Co. Note Q1 Results

Employers Insurance Company of Nevada, A Mutual Company (“EICN”) and its wholly owned subsidiary Fremont Employers Insurance Company (“FEIC”) (collectively the “Company”), a provider of workers’ compensation products and services, reported its statutory financial results for the first quarter, including the statutory financial position as of March 31, 2003.

For the three months ended March 31, 2003, the company reported a consolidated net income of $2.1 million on consolidated net premiums earned of $67.3 million, as compared to a net loss of $1.3 million on net premiums earned of $30.4 million for the three months ended March 31, 2002. The 121.4 percent growth in net premiums earned is due primarily to the acquisition of an ongoing book of business based in California. That acquisition, completed in June 2002, resulted in the formation of Fremont Employers Insurance Company (FEIC).

The company’s combined ratio decreased to 99.8 percent from 109.2 percent for the three months ended March 31, 2003 and 2002, respectively. The primary factor contributing to the decrease in the combined ratio was a decrease in the loss and loss adjustment expense (“LAE”) ratio to 65.7 percent from 80.1 percent for the first quarter of 2003 and 2002, respectively. This ratio decreased despite posting $5.7 million in lower favorable loss and loss adjustment expense reserve development relating to prior accident years for the Nevada business.

The lower loss and LAE ratio was primarily due to lower loss and LAE ratios recognized within the FEIC operations, comprised mainly of California business. The company believes this is the result of a focused attention to underwriting discipline and risk selection. The lower loss and LAE ratio was partially offset by an increase in the underwriting expense ratio to 33.3 percent from 27.5 percent for the first quarter of 2003 and 2002, respectively. The increase in the underwriting expense ratio was mainly the result of costs associated with a fronting facility maintained by FEIC that was not a part of the company’s operations in the prior year quarter.

Investment income of $7.7 million in the first quarter of 2003 is approximately $500,000 lower than the prior year quarter due primarily to a continued decrease in market investment yields on the company’s fixed income investment portfolio.

The company’s financial position remains strong, with assets of $1.26 billion and policyholder surplus of $218 million at March 31, 2003. Fremont Employers’ financial position is similarly strong, with approximately $78 million in policyholder surplus.