Employers Q1 Earnings Call Highlights

Key Points

• Underwriting discipline: Management prioritized underwriting quality over volume, producing gross premiums written of $181M (down 15% from $212M) and essentially flat earned premium (‑1%), and expects this "teens"-type reduction to continue while being selective in competitive markets like California and Massachusetts.
• Losses and profitability: Losses and LAE rose to $129M with the current accident‑year loss & LAE ratio at 72% and no reserve strengthening required, but adjusted net income fell to $10.3M from $21.3M a year earlier.
• Capital returns and recapitalization: Employers returned $83M in Q1 (including repurchasing >1.8M shares for $76.9M at an average $42.42), completed a $125M debt recap, raised the quarterly dividend to $0.34, and approved a new $125M share‑repurchase authorization through Dec. 31, 2027.

Employers NYSE: EIG executives repeatedly emphasized “discipline” on the company’s first-quarter 2026 earnings call, describing a deliberate decision to prioritize underwriting quality over premium volume as market competition intensifies in certain areas of workers’ compensation.

Chief Executive Officer Kathy Antonello said the approach showed up in quarterly results through lower underwriting expenses, stable loss trends, and ongoing capital returns. “We made a deliberate choice to prioritize underwriting quality over volume, and the numbers reflect that conviction,” Antonello said.

Premium trends reflect pullback in new business

Mike Pedraja, Employers’ chief financial officer, said gross premiums written were $181 million, down from $212 million in the prior-year quarter, a 15% decrease “due primarily to a reduction in new business writings.” Earned premium was “essentially flat year-over-year,” Antonello added, down about 1%, as pricing and underwriting actions taken in 2025 continued to flow through results.

On the company’s outlook for that top-line pressure, Pedraja said the trend was in line with expectations. “This is exactly as we expected and planned,” he told Karol Chmiel of Citizens, adding that the company anticipated “teens type of reduction” to continue “throughout the rest of the year.” Antonello also said the company expects something similar throughout 2026, while “introducing new areas throughout the year too.”

In response to a question about audit premium adjustments, Pedraja said the impact was “relatively small,” citing $5 million of adjustments in the quarter. He also noted payroll trends have moderated compared with the post-COVID period. “The payroll increases are not developing as they were after COVID,” he said.

Loss trends and reserve position

Employers reported losses and loss adjustment expenses of $129 million, compared with $121 million a year earlier, according to Pedraja. He said the quarter included no prior-period development on the company’s voluntary business, and the current accident year loss and LAE ratio was 72%, consistent with 2025.

Antonello said the company’s first-quarter actuarial review “confirmed the adequacy of our prior year reserves with no strengthening required.” Addressing a question from Mark Hughes of Truist about potential future reserve development, Antonello described the company’s process: an actual-versus-expected analysis at the end of the first and third quarters, and a deeper “full analysis” at the end of the second and fourth quarters. She said first-quarter results were close to expectations. “This quarter, everything came in right around where we expected, so we did not feel compelled to make a change,” she said, adding that decisions later in the year would depend on what emerges in subsequent reviews.

On industry topics, Antonello said she did not expect anything “significant” to emerge in near-term discussions around inflation or medical severity, based on what Employers was seeing internally. “We’re not seeing anything significant that’s impacting our book of business,” she said, noting the company tracks an internal prescription drug index that was “up slightly” but “not…alarming.”

Expense management and investment results

Management highlighted improvements in underwriting efficiency. Underwriting expenses were $41 million, down from $43 million a year ago, which Pedraja attributed to expense management efforts including “reduced personnel costs and other variable costs such as policyholder dividends.” Antonello said the underwriting expense ratio improved to 22.6% from 23.4% a year ago.

Commission expense was $24 million, up from $23 million, which Pedraja said was driven primarily by “a non-recurring 2025 favorable adjustment.”

On investments, Pedraja said that excluding returns from private equity partnership investments, first-quarter net investment income exceeded last year’s by $1.5 million, helped by higher book yields and redeployment from a prior-year rebalancing. He said fixed maturities ended the quarter with a modified duration of 4.4 and average credit quality of A+. The weighted average book yield was 4.9% at quarter end, compared to 4.5% a year earlier.

Adjusted net income—excluding net realized and unrealized investment gains and losses and the benefit of loss portfolio transfer (LPT) deferred gain amortization—was $10.3 million, down from $21.3 million last year, Pedraja said.

Capital returns, recapitalization, and new authorization

Employers continued its capital return program during the quarter. Antonello said the company returned $83 million to shareholders in the first quarter through share repurchases and dividends, following $215 million returned in 2025.

Pedraja said the company repurchased more than 1.8 million shares at an average price of $42.42 per share, totaling $76.9 million. He said the average repurchase price represented a 17% discount to book value per share including the deferred gain. He also disclosed that from April 1 through April 28, 2026, Employers repurchased an additional 353,547 shares at an average price of $42.21 per share.

Antonello said book value per share, including the deferred gain, increased to $51.26. She also said the company completed a $125 million new debt issuance tied to its recapitalization plan, consisting of $105 million from the Federal Home Loan Bank and $20 million from its credit facility, for a weighted average pre-tax interest rate of 4.1%.

In addition, Antonello said the board declared a second-quarter 2026 dividend of $0.34 per share, a 6.25% increase from the prior quarter, and approved a new $125 million share repurchase authorization through Dec. 31, 2027.

Market conditions: California rate environment and “irrational” competition

In the Q&A, Antonello spent significant time discussing pricing dynamics, particularly in California and certain middle-market segments. She said she previously would have described pricing as “competitive,” but now characterizes it as “closer to getting somewhat irrational in some jurisdictions and premium bands,” specifically citing guaranteed cost middle market.

Antonello said she has seen some carriers exiting certain states and classes, naming New York, California, and Massachusetts as examples of where exits have occurred across the market. She said Employers “pulled back significantly” in Massachusetts, reduced exposure in certain class codes, and cut ties with MGAs the company believed were underperforming.

On California, Antonello pointed to a recent development at the California Bureau. “The California Bureau voted earlier this month to submit a second consecutive double-digit pure premium rate increase to the Commissioner,” she said, aligning with underwriting conditions the company has observed in the state.

Antonello provided detail on renewal pricing, saying that when adjusting for changes in mix of business, Employers saw payrolls up about 0.5% and average renewal rates “countrywide increased about 6%” when comparing the first quarter of 2026 to the first quarter of 2025, with “a significant portion of that…coming from California,” where the company is achieving “double-digit rate increases” on renewals.

She also said submission volumes were elevated. “Submissions were the highest that we’ve seen across the company and specifically in California in Q1 of 2026 that we’ve ever seen,” Antonello said, while adding that Employers is being selective about where it quotes and is willing to walk away from business when pricing is, in her view, unreasonable.

Antonello said growth initiatives include entering new underwriting segments, appointing new agents in areas with better pricing margin, and a recently launched Excess Workers’ Compensation product.

Technology and AI initiatives

Antonello also discussed the company’s push to deploy artificial intelligence tools across the organization, saying Employers has moved “from AI experimentation to deployment of products using AI.” She said the company recently gathered about 400 employees to introduce its AI implementation strategy.

She said capabilities used in the company’s rapid entry into excess workers’ compensation are being applied to improve underwriting insights, automate premium audit and claims operations, and engage customers. Antonello also said Employers “became the first insurance carrier to bring quoting directly into ChatGPT,” which she said was enabled by the company’s patented technology designed to reach business owners where they engage.

Looking ahead, Antonello said the company believes it is “well-positioned and well-capitalized,” citing approximately $1 billion of total capitalization and an AM Best A rating.

About Employers NYSE: EIG

Employers 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.

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