Employers Q1 2025 Earnings Report

Employers EPS Results

• Actual EPS: $0.87
• Consensus EPS: $0.69
• Beat/Miss: Beat by +$0.18
• One Year Ago EPS: $0.67

Employers Revenue Results

• Actual Revenue: $202.60 million
• Expected Revenue: $216.81 million
• Beat/Miss: Missed by -$14.21 million
• YoY Revenue Growth: -9.20%

Employers Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: After Market Closes
• Conference Call Date: Friday, May 2, 2025
• Conference Call Time: 11:00AM ET

Employers (NYSE:EIG) Holdings, Inc. (NYSE: EIG) is a publicly traded property and casualty insurance holding company headquartered in Des Moines, Iowa. Through its subsidiaries, Employers Mutual Casualty Company and Employers Preferred Insurance Company, the firm specializes in providing workers’ compensation coverage alongside an array of commercial insurance products. Its service offerings include general liability, commercial auto, businessowners policies and umbrella coverages, tailored to meet the risk-management needs of small and mid-sized businesses across multiple industries.

The company markets its insurance solutions primarily through a network of independent agencies and brokers, leveraging local market expertise to underwrite policies that address the unique exposures faced by clients in manufacturing, construction, healthcare, retail and service sectors. In addition to core insurance products, Employers Holdings offers loss control services, claims administration and online risk-management tools designed to help policyholders minimize workplace accidents and manage costs effectively.

With roots dating back to 1913 when Iowa Employers Mutual was founded to serve local businesses, Employers Holdings converted into a stock-holder structure and began trading publicly in 2005. Since then, it has expanded its footprint beyond the Midwest, writing business in more than two dozen U.S. states. The company maintains regional offices to support its agent network and ensure responsive customer service. By combining a century-old heritage in workers’ compensation with modern underwriting practices and risk-control expertise, Employers Holdings aims to deliver financial stability and value to its policyholders over the long term.

Employers Q1 2025 Earnings Call Transcript

Key Takeaways

• The company earned a record $32 million in net investment income during Q1, a 20% increase driven by private equity returns and higher fixed maturity yields.
• The current accident year loss and LAE ratio on voluntary business rose to 66% from 64%, reflecting conservative reserving and adverse loss trends in the industry.
• Underwriting expense ratio improved to 23.4% from 25% a year ago, driven by lower bad debt and compensation costs, with further expense efficiencies expected in 2025.
• Adjusted net income, excluding unrealized investment swings, increased 24% year-over-year to $21.3 million, offsetting a $9 million after-tax unrealized loss in equity holdings.
• The Board authorized a new $125 million share repurchase program and raised the quarterly dividend by 7% to $0.32 per share, underscoring confidence in financial strength.

Presentation

[Operator]

Thank you for standing by. Welcome to the 1st quarter 2025 Employers Holdings Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lori Brown, Chief Legal Officer. Please proceed.

[Lori Brown, Chief Legal Officer at Employers Holdings, Inc.]

Thank you, Kevin. Good morning and welcome, everyone, to the 1st quarter 2025 earnings call for Employers. Today's call is being recorded and webcast from the investor section of our website, where a replay will be available following the call. Presenting today are Kathy Antonello, our Chief Executive Officer, and Mike Pedraja, our Chief Financial Officer. Statements made during this conference call that are not based on historical facts are considered forward-looking statements. These statements are made in reliance on the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations expressed in our forward-looking statements are reasonable, risks and uncertainties could cause actual results to be materially different from our expectations, including the risks set forth in our filings with the Securities and Exchange Commission.

[Lori Brown, Chief Legal Officer at Employers Holdings, Inc.]

All remarks made during the call are current only at the time of the call and will not be updated to reflect subsequent developments. The company also uses its website as a means of disclosing material nonpublic information and for complying with disclosure obligations under the SEC's Regulation FD. Such disclosures will be included in the investor section on our website. Accordingly, investors should monitor that portion of our website in addition to following our press releases, SEC filings, public conference calls, and webcasts. In our earnings press release and in our remarks or responses to questions, we may use non-GAAP financial measures. Reconciliations of these non-GAAP measures to our GAAP results are included in our financial supplement as an attachment to our earnings press release, our investor presentation, and any other materials available in the investor section of our website. Now I'll turn the call over to Kathy.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Thank you, Lori. Good morning, everyone, and welcome to our 1st quarter 2025 Earnings Call. Today, we will follow our typical agenda, where I will begin by providing highlights of our 1st quarter 2025 financial results. I will then hand it over to Mike for more details on our financials. Prior to Q&A, I will come back to you with some additional commentary. Our 1st quarter net premium earned was relatively flat compared to 2024. This result was driven by higher renewal premium offset by lower new business and audit premium. Rate increases and underwriting actions taken to maintain our underwriting profitability targets in certain states impacted our new business premium, while final audit premium pickup and audit accrual decreased in line with the moderation of employment and wage growth.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Despite these headwinds, Employers ended the period with another record number of policies in force, with a year-over-year growth rate of 4%. We earned $32 million of net investment income during the quarter, an increase of 20% and meaningfully higher than any other quarter in our history as a publicly traded company. Our current accident year loss and LAE ratio on voluntary business was 66% versus the 64% we maintained throughout 2024. This increase is consistent with our conservative reserving philosophy, and the recent loss ratio and pricing trends experienced both at Employers and within our industry. Consistent with our normal practice, we did not perform a full loss reserve assessment, as full assessments are performed twice a year in the 2nd and 4th quarters. We'll provide you with details of this analysis and any associated impact on prior year reserves next quarter.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

I'm pleased with the reductions we achieved in our underwriting expense ratio, which was 23.4% this quarter, down from 25% a year ago. We believe we'll achieve further expense ratio improvement throughout 2025. With that, Mike will now provide a deeper dive into our financial results, and then I'll return to provide my closing remarks. Mike.

[Mike Pedraja, CFO at Employers Holdings, Inc.]

Thank you, Kathy. As this is my first official call, I'd like to thank Kathy, Lori, and the broader Employers team for welcoming me to this fantastic franchise. I'm very excited about our prospects. For everyone on the call, I look forward to meeting and working with you in the coming weeks. For the quarter, gross premiums written were $212 million, an increase of 1%. The increase was due to higher renewal business partially offset by lower new business and final audit premiums. As Kathy mentioned, prudent pricing actions and targeted underwriting changes implemented in certain states impacted our new business production. While final audit premiums decreased, net premiums earned were $183 million, a decrease of 1%. During the period, our losses and loss adjustment expenses were $121 million versus $117 million a year ago.

[Mike Pedraja, CFO at Employers Holdings, Inc.]

The increase was primarily due to higher current accident year loss and loss adjustment expense ratio, which we increased from 64%-66%. Commission expense was $23 million versus $25 million a year ago, and our commission expense ratio was 12.6% versus 13.6%. The decreases were primarily related to the release of commissions payable associated with nonperforming policies sent to collections. Underwriting expenses were $43 million versus $46 million, and our underwriting expense ratio was 23.4% versus 25%. The reduction in this ratio was primarily the result of decreases in bad debt expense and compensation-related expenses. Our net investment income was $32 million versus $27 million a year ago, an increase of 20%. The increase was primarily due to returns from our investments in private equity limited partnerships, along with higher yields on our fixed maturities securities.

[Mike Pedraja, CFO at Employers Holdings, Inc.]

These fixed maturity investments currently have a duration of 4.3 years and an average credit quality of A-plus. Our weighted average book yield was 4.5% at quarter end, which is up nicely from 4.3% a year ago. Our quarterly net income of $12.8 million was unfavorably impacted by $9 million of net after-tax unrealized investment losses generated from equity securities and other investment holdings due to the recent U.S. capital market fluctuations. Our stockholders' equity was favorably impacted by $21 million of net after-tax unrealized gains generated from our fixed maturity investments. Our adjusted net income, which excludes unrealized investment gains and losses and the benefit of our LPT deferred gain amortization, totaled $21.3 million, a 24% increase from last year's $17.2 million. During the 1st quarter, we repurchased $21 million of our common stock at an average price of $49.69 per share.

[Mike Pedraja, CFO at Employers Holdings, Inc.]

Thus far, in the 2nd quarter, we have repurchased an additional 170,000 shares of our common stock at an average price of $48.35 per share. On Wednesday, our board of directors authorized a new stock repurchase program to allow for repurchase of up to $125 million of our common stock over the 20-month period from May 6th, 2025, to December 31st, 2026. This new program replaces our existing program that was scheduled to expire on July 31st, 2025, but has been exhausted. Also on Wednesday, our board of directors declared a 7% increase in our quarterly dividend to $0.32 per share. The dividend is payable on May 28 to stockholders of record on May 14. We believe both actions, the increase in our quarterly dividend and the new stock repurchase program, are reflections of our confidence in Employers' financial strength and financial prospects.

[Mike Pedraja, CFO at Employers Holdings, Inc.]

I will turn the call back to Kathy.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Thank you, Mike. We continue to value profitability over growth and have identified a number of refinements in our underwriting and pricing approach that we believe will allow us to maintain our underwriting discipline while returning to moderate new business growth levels. Our appetite expansion effort continues to identify areas of opportunity for profitable growth, and our success has given us the confidence to accelerate this effort going forward. To date, we have not experienced negative impacts from the tariff discussions, but we intend to closely monitor the cost of prescription drugs and medical services for potential changes. If any recessionary headwinds emerge, we are cautiously optimistic that our deep relationships with our customers and agents, our product and service value proposition, and our geographic and industry segment diversification will allow us to maintain our strong customer base and weather the storm.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

I'm very pleased with the team's continued focus on expense management and our prudent capital management. We continue to improve our key operating metrics, which is a clear indication of our success. After considering dividends declared, our book value per share, including the deferred gain, increased 14% to $48.25, and our adjusted book value per share increased by 9% to $50.75 over the last 12 months. Finally, we returned $27.5 million to our shareholders this quarter through a combination of regular quarterly dividends and share repurchases at an average price that was accretive to our adjusted book value per share. As Mike mentioned, we're pleased to be in a strong financial position, which allows us to declare a dividend increase and a new share repurchase authorization. With that, Kevin, we will now take questions.

[Operator]

Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Mark Hughes with Truist. Your line is open.

[Mark Hughes, Analyst at Truist]

Yeah, thank you. Good morning.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Good morning, Mark.

[Mark Hughes, Analyst at Truist]

Kathy, could you talk about any specifics you might be able to share regarding those loss trends? You've taken some meaningful action here to protect the balance sheet and, as you say, focus on profitability. What are you seeing, and can you characterize how broad that is in terms of geography?

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Sure. So you're referring, I assume, to the increase in our accident year loss and LAE ratio from 64%-66% in 2025.

[Mark Hughes, Analyst at Truist]

Exactly.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Okay. Yeah. The higher 2025 ratio reflects a few things that we're seeing. The first is the ongoing competitive rate environment. That's first and foremost. We're also seeing some pressure on accident years 2023 and 2024. We've also, along with the California Bureau, seen a rise in cumulative trauma claims in California in the more recent accident years. Finally, it's some of the overall decrease in favorable developments that the industry has seen in recent years. We're factoring that in. Those four things together made us feel that we should increase our current accident year loss ratio. Having said all that, the increase is directionally consistent with what we're seeing across the entire work comp industry, and the overall selection of 66% is below what we've seen as an industry average, which has been in the range of 69%-70% in recent years.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

We have taken, I mentioned in our prepared remarks, that we've taken some targeted pricing and underwriting actions in Q1. We're still refining those. That's part of this effort. High level, those are the things that we're seeing.

[Mark Hughes, Analyst at Truist]

Yeah. How about underlying medical inflation? If you look at frequency, severity, cost of treatments, you name it, is there any change there? I hear you on the cumulative trauma, but how about the other drivers of medical expenses?

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Yeah. We keep an eye on frequency and severity. When we look at our based on on-level premium, as we do in rate-making, our lost-time claim frequencies have really continued to, generally speaking, now it varies by state, but they've generally continued to trend downward over the last several years. Although, and I say it varies by state, in California, we did see an uptick in the latest accident year, and that is almost all attributable to the cumulative trauma claims that we're seeing, similar to what the Bureau is seeing. Our overall severity values have pretty much held steady in the more recent years and are below what we saw pre-pandemic level, and that's driven by lower medical severity. Then on the indemnity side, it's trending about the same as wage inflation.

[Mark Hughes, Analyst at Truist]

Yeah. When I hear cumulative trauma, my radar goes up a little bit, and I wonder whether that's maybe caused by the macro condition. Somebody's looking for wage replacement. I know you cover cumulative trauma, and there's plenty of support within the system for that, but it always sounds to me like it's a little aggressive on the part of the claimants. Can you talk me out of that or address whether there might be some macroeconomic contribution to those claims?

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Yeah. It's an interesting question because these are arising from accident year 2024 is what we're seeing now and what we're reacting to. I can't point to anything in the macro environment in 2024 that would have caused this. It sort of is an interesting phenomenon. I can say that it is only in California, and we know that there are provisions in California that allow cumulative trauma claims to be filed post-termination of an employee. California is the only state, to my knowledge, that allows that. As you mentioned, these claims that come in post-term, there's no return-to-work potential. They have high PD, some cumulative work stress usually associated with them. They usually come in the door with an attorney. It's just a California phenomenon. It would be great to see that remedied.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Yeah, I don't see—I mean, back to your original question, I don't see anything in the 2024 macro environment that has caused this.

[Mark Hughes, Analyst at Truist]

Is that we'll put it under the social inflation. The attorneys are getting more aggressive and getting the word out. As you say, they usually show up with an attorney without the—

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Yeah. I would say that that's an accurate representation.

[Mark Hughes, Analyst at Truist]

Yeah. Okay. Yeah.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

I mean, the one thing I would add to that is you've probably seen that the WCIRB has recommended an 11.2% increase in their pure premium rates effective September 1 of 2025. While there were many things going on that caused that 11.2% increase to be filed, one of them that was called out in the filing was the cumulative trauma claims.

[Mark Hughes, Analyst at Truist]

Yeah. Am I still right in thinking the rate filings are advisory that may influence the behavior of carriers, that if they're looking for references, if the state says up 11, then maybe that'll move the benchmark competitive level up a bit, but it's not binding by any means? Is that a fair way to describe it?

[Kathy Antonello, CEO at Employers Holdings, Inc.]

That is correct. In California, they're advisory. Any individual carrier is going to look at their own book of business, and it's going to vary dramatically both from each other and the statewide data. I believe California has plus or minus 50% schedule rating. We do have a lot of flexibility in California, and we'll do what's right for our book of business.

[Mark Hughes, Analyst at Truist]

Yeah. Very good. I'll just ask one more and apologize for going on, but what do you think is going to show up when the NCCI does the state of the line? How do you see kind of redundancy across the industry? I was interested on the Gallagher call. They said the workers' comp rates that they had said were up 1% in Q4 were up 5% in Q1. I thought that was kind of striking, not the usual description of what's going on. What do you think NCCI is going to say about the industry fundamentals?

[Kathy Antonello, CEO at Employers Holdings, Inc.]

We'll know in a couple of weeks, but I would say, generally speaking, what we have been seeing is it seems like the reserve redundancies, while there are still significant redundancies in the industry, it seems like carriers are reducing a little bit less, and maybe that's just cautionary. From a rate environment, when we look at our own internal rates, year-over-year, a rolling 12 months, we were flat. When I looked at six months over six months, we were up between 4% and 5%.

[Mark Hughes, Analyst at Truist]

On a rolling 12 months, you're flat. Rolling six months, you're up 4%-5%. Is that what that was?

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Correct. Yeah. Not too different from what you said you saw in a recent report.

[Mark Hughes, Analyst at Truist]

Yeah. Yeah. That was Gallagher's feedback on their conference call last night. Okay. Thank you very much for all the detail. Appreciate it.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Okay. Thank you, Mark.

[Operator]

Again, ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. I'm not showing any further questions at this time. I turn the call back over to Kathy Antonello for any further remarks.

[Kathy Antonello, CEO at Employers Holdings, Inc.]

Okay. Thanks, Kevin. Thank you, everyone, for joining us this morning. We look forward to meeting with you again in July when we report our 2nd quarter numbers.

[Operator]

Thank you, ladies and gentlemen. That concludes today's presentation. You may now disconnect and have a wonderful day.

Participants

Executives

• Lori Brown, Chief Legal Officer
• Kathy Antonello, CEO
• Mike Pedraja, CFO

Analysts

• Mark Hughes, Analyst at Truist