LANCASTER, Pa., Aug. 6 /PRNewswire-FirstCall/ -- Eastern Insurance Holdings, Inc. ("EIHI") (Nasdaq: EIHI) today reported earnings for the three months ended June 30, 2009. EIHI reported net income of $3.0 million, or $0.32 per diluted share, for the second quarter of 2009, compared to net income of $1.5 million, or $0.16 per diluted share, for the same period in 2008. EIHI's diluted book value per share was $14.82 as of June 30, 2009 compared to $14.13 as of December 31, 2008, an increase of $0.69 per share or 4.9 percent.

"I am pleased to report strong results in our operating segments for the second quarter of 2009, despite a continuing difficult economic environment," said Bruce M. Eckert, Chief Executive Officer. "Our combined ratio for the three months ended June 30, 2009 in our workers' compensation insurance and group benefits insurance segments were 84.9 percent and 99.0 percent, respectively, and our consolidated combined ratio was 95.2 percent. Our favorable results were driven by solid growth in workers' compensation insurance direct written premiums, improved workers' compensation reinsurance terms, aggressive expense management initiatives and disciplined underwriting in an environment with high unemployment. Second quarter, year over year workers' compensation insurance direct written premium increased by 10.5 percent to $24.9 million as a result of solid premium renewal retention ratios, new business writings in the Southeast and the acquisition of Employers Security Insurance Company in September 2008. Additional premium received as a result of payroll audits remained positive during the quarter and aggregated approximately $352,000 for the six months ended June 30, 2009. Competitive pressures remain strong across all geographic sectors, however, again during the quarter, we were able to place 90.0 percent of our policies into non-dividend paying plans. Reported and open lost-time workers' compensation claims were in line with the previous years' second quarter claims. Our extensive claims management and cost containment initiatives continue to successfully manage medical inflation. Also, we believe our strong claim closing patterns mitigate the negative effects of recessionary employment trends. We did experience favorable loss reserve development from accident years prior to 2009 in the amount of $750,000 for the three months ended June 30, 2009 in our workers' compensation insurance segment. The results in our group benefits insurance segment improved in the second quarter of 2009 driven primarily by the return to normalcy of our life loss ratio. We continue to produce solid new sales in the group benefits insurance segment and prioritize bottom-line underwriting profitability over top-line growth. I was particularly pleased with the responsiveness of our group benefits team to opportunities presented by a market dislocation in the Southeast. As I previously reported, we recently revisited all areas of expenses during the first and second quarters of 2009. I am very pleased to report that our consolidated expense ratio decreased to 32.8 percent for the three months ended June 30, 2009 compared to 34.6 percent for the same period in 2008."

Eckert added, "Our diluted book value per share increased to $14.82 per share during the second quarter of 2009 driven by favorable operating results and an increase in after-tax accumulated other comprehensive income related to our investment portfolio of $3.5 million. We continue to execute on our 2009 strategic initiatives, including geographic expansion of our workers' compensation insurance products and the implementation of ParallelPay, our 'pay-as-you-go' workers' compensation insurance product. Direct written premium from our ParallelPay product contributed to our solid year-over-year growth adding $1.6 million during the second quarter of 2009, the initial quarter this product was offered. This product continues to be favorably received by the marketplace. We are now licensed to write business in 23 states and are currently evaluating new territories to expand our very profitable workers' compensation insurance business."

Consolidated highlights for the second quarter include:

• Revenue for the second quarter of 2009 increased to $36.2 million, compared to $36.1 million for the same period in 2008. The increase in revenue is due primarily to an increase in net premiums earned and income from limited partnerships, offset by a decrease in investment income and a change from net realized investment gains in 2008 to net realized investment losses in 2009;
• Net premiums earned increased $800,000 to $34.0 million in the second quarter of 2009 from $33.2 million during the same period in 2008. Net premiums earned increased 2.4 percent due primarily to the growth in workers' compensation insurance premium and the acquisition of Employers Security Insurance Company partially offset by the termination of the reinsurance treaty effective July 1, 2008 that comprised the run-off specialty reinsurance segment;
• Net investment income decreased $700,000 to $1.7 million ($1.3 million after-tax) for the three months ended June 30, 2009, compared to $2.4 million ($1.7 million after-tax) for the same period in 2008. The decrease in net investment income is due primarily to a decrease in overall invested assets;
• The change in equity interest in limited partnerships increased $801,000 to income of $444,000 ($302,000 after-tax) for the three months ended June 30, 2009, compared to a loss of $357,000 ($232,000 after-tax) for the same period in 2008;
• Net realized investment losses, excluding the segregated portfolio cell reinsurance segment, were $209,000 ($220,000 after-tax) for the three months ended June 30, 2009, compared to net realized investment gains of $385,000 ($250,000 after-tax) for the same period in 2008. Net realized investment losses for the three months ended June 30, 2009 include $1.5 million ($1.0 million after-tax) of other-than-temporary impairments, primarily on equity securities;
• $750,000 ($488,000 after-tax) of favorable loss reserve development on prior accident years was recorded in the workers' compensation insurance segment for the three months ended June 30, 2009, compared to $1.0 million ($650,000 after-tax) for the same period in 2008; and
• After-tax intangible asset amortization expense of $281,000 was recorded for the three months ended June 30, 2009, compared to $213,000 for the second quarter of 2008.
  

Weighted average fully diluted shares considered outstanding used to calculate diluted earnings per share for the three months ended June 30, 2009 and 2008 consisted of the following:

                                                  2009         2008
                                                  ----         ----
    Shares issued on June 16, 2006            10,603,548   10,603,548
    Weighted average ESOP shares                 218,106      143,357
    Weighted average restricted stock shares      98,779       91,699
    Weighted average treasury shares
     purchased                                (2,091,757)  (1,941,263)
    Weighted average stock warrants
     exercised(1)                                180,291            -
    Stock warrants(1)                                  -      306,099
                                                     ---      -------
    Total                                      9,008,967    9,203,440
                                               =========    =========

    (1) 306,099 warrants were outstanding as of January 1, 2009 of which
        244,879 warrants were earned.  The remaining 61,220 warrants will not
        be earned.  On March 10, 2009, the 244,879 warrants were exercised.
        EIHI retained 64,588 warrants as payment of the exercise price.

Segment Operating Results

Workers' Compensation Insurance

EIHI's workers' compensation insurance segment reported net income of $2.1 million for the second quarter of 2009, compared to $3.0 million for the second quarter of 2008.