Employers Holdings, Inc.EIG
Employers Holdings, Inc. Income Taxes Disclosure
Income Taxes
The Company files a consolidated federal income tax return. The insurance subsidiaries pay premium taxes on premiums in lieu of some states' income or franchise taxes. Tax years 2020 through 2025 remain open and are available for examination by the Internal Revenue Service (IRS).
The One Big Beautiful Bill Act (OBBBA) was enacted into law on July 4, 2025. Among its provisions, the OBBBA provides for the immediate expensing of internally-developed software expenses, including those that had been previously been capitalized. While the enactment of OBBBA did not materially impact the Company's overall income tax expense, the provision for internally-developed software expenses lowered the Company's federal income tax by $8.5 million for the year ended December 31, 2025.
The Company's provision for income taxes consisted of the following:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current tax expense: | (in millions) | ||||||||||||||||
| Federal | $ | 0.4 | $ | 23.1 | $ | 23.7 | |||||||||||
| State | 0.7 | 0.8 | 1.5 | ||||||||||||||
| Total current tax expense | 1.1 | 23.9 | 25.2 | ||||||||||||||
| Total deferred federal tax expense | 0.1 | 4.2 | 5.1 | ||||||||||||||
| Income tax expense | $ | 1.2 | $ | 28.1 | $ | 30.3 | |||||||||||
The differences in amounts and percentages between the statutory federal tax rate of 21% and the Company's effective tax rate on net income before income taxes as reflected in the Consolidated Statements of Comprehensive Income (Loss) were as follows:
| Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
(in millions) | (percent) | (in millions) | (percent) | (in millions) | (percent) | ||||||||||||||||||||||||||||||
U.S. Federal statutory tax rate | $ | 2.5 | 21.0 | % | $ | 30.8 | 21.0 | % | $ | 31.2 | 21.0 | % | |||||||||||||||||||||||
State income tax expense, net of federal income tax effect(1) | 0.5 | 4.3 | 0.6 | 0.4 | 1.1 | 0.8 | |||||||||||||||||||||||||||||
Tax credits | (0.5) | (4.4) | (0.8) | (0.5) | (0.3) | (0.2) | |||||||||||||||||||||||||||||
Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Tax-advantaged investment income | (0.4) | (3.1) | (0.4) | (0.3) | (0.9) | (0.6) | |||||||||||||||||||||||||||||
LPT deferred gain amortization, LPT reserve adjustments and LPT contingent commission | (1.2) | (10.4) | (1.2) | (0.8) | (1.5) | (1.0) | |||||||||||||||||||||||||||||
IRC section 162(m), excessive employee remuneration | 0.6 | 4.9 | 0.8 | 0.6 | 0.9 | 0.6 | |||||||||||||||||||||||||||||
Pre-Privatization loss and LAE reserve adjustments, excluding LPT | (0.6) | (5.1) | (1.1) | (0.8) | (0.1) | — | |||||||||||||||||||||||||||||
| Other | 0.3 | 2.9 | (0.6) | (0.4) | (0.1) | (0.2) | |||||||||||||||||||||||||||||
Effective tax rate | $ | 1.2 | 10.1 | % | $ | 28.1 | 19.2 | % | $ | 30.3 | 20.4 | % | |||||||||||||||||||||||
(1) Florida and Illinois make up the majority (greater than 50 percent) of the state income tax expense, net of federal income tax effect category.
The LPT Reserve Adjustments for the year ended December 31, 2024 and 2023 decreased net income by $1.7 million, and $0.9 million, respectively, but did not affect taxable income. The LPT Contingent Commission adjustments increased net income by $0.4 million and $0.3 million during 2024 and 2023, respectively, but did not increase taxable income.
The significant components of deferred income taxes, net, were as follows as of December 31:
| 2025 | 2024 | ||||||||||||||||||||||
| Deferred Tax | Deferred Tax | ||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Unrealized capital gains and losses, net | $ | — | $ | 23.9 | $ | — | $ | 4.3 | |||||||||||||||
| Deferred policy acquisition costs | — | 12.2 | — | 12.7 | |||||||||||||||||||
| Intangible assets | — | 1.6 | — | 1.6 | |||||||||||||||||||
Loss reserve discounting for income tax reporting | 35.2 | — | 31.4 | — | |||||||||||||||||||
| Unearned premiums | 15.2 | — | 15.8 | — | |||||||||||||||||||
| Allowance for bad debt | 4.9 | — | 4.2 | — | |||||||||||||||||||
| Stock-based compensation | 1.6 | — | 1.6 | — | |||||||||||||||||||
| Accrued liabilities | 3.5 | — | 4.2 | — | |||||||||||||||||||
| Net operating loss carryforward | 1.7 | — | — | — | |||||||||||||||||||
| Operating leases | 0.8 | 0.8 | 0.9 | 0.8 | |||||||||||||||||||
| Other | 1.9 | 12.0 | 9.3 | 9.7 | |||||||||||||||||||
| Total | $ | 64.8 | $ | 50.5 | $ | 67.4 | $ | 29.1 | |||||||||||||||
Deferred income tax asset, net | $ | 14.3 | $ | 38.3 | |||||||||||||||||||
Deferred tax assets are required to be reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax asset will not be realized. Realization of the deferred income tax asset is dependent on the Company generating sufficient taxable income in future years as the deferred income tax charges become deductible for tax reporting purposes. Although realization is not assured, management believes that it is more likely than not that the net deferred income tax asset will be realized. For the years ended December 31, 2025 and 2024, respectively, the Company did not record a deferred tax asset valuation allowance.
As of December 31, 2025, the Company had federal net operating loss (NOL) carryforwards of approximately $1.7 million. These NOL carryforwards arose with the non-insurance companies within the Company’s consolidated federal income tax return group and thus do not expire and may be carried forward indefinitely, subject to an annual limitation of 80% of future taxable income. The Company has determined that it expects to fully utilize these NOL carryforwards against future taxable income.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, in income taxes. For the years ended December 31, 2025, 2024, and 2023, respectively, the Company incurred no material interest and penalties. All of the total amount of gross unrecognized tax benefits, if recognized, would impact the Company's effective tax rate. The changes in the balances of gross unrecognized tax benefits were as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
Beginning balance of unrecognized tax benefits | $ | 1.4 | $ | 0.6 | $ | 0.4 | |||||||||||
Increases resulting from prior period tax provisions | 0.1 | 0.4 | — | ||||||||||||||
Decreases resulting from prior period tax provisions | (0.1) | — | — | ||||||||||||||
Increases resulting from current period tax provisions | 0.4 | 0.5 | 0.2 | ||||||||||||||
Decreases resulting from lapse of applicable statute of limitations | — | (0.1) | — | ||||||||||||||
Ending balance of unrecognized tax benefits | $ | 1.8 | $ | 1.4 | $ | 0.6 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 19, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.