Employers Q3 Earnings Call Highlights

Key Points

• Employers returned to profitability in Q3 2026, reporting $0.64 in diluted net income per share versus a $0.36 loss a year earlier. The improvement reflected better underwriting results, higher investment income, and the absence of $38 million in prior-year reserve strengthening.
• The company’s underwriting actions reduced gross premiums written by 18% and policies in force by 8%, while its GAAP combined ratio improved to 108.4% from 129.7%. Employers expects its targeted re-underwriting program to be completed by the fourth quarter.
• Investment income rose 23.8% to $32.3 million, aided by higher fixed-income yields and private-equity distributions. Employers also returned $24.4 million to shareholders through buybacks and dividends and declared a $0.34 per-share fourth-quarter dividend.

Employers NYSE: EIG reported third-quarter 2026 net income of $0.64 per diluted share, compared with a net loss of $0.36 per diluted share a year earlier, as the workers’ compensation insurer cited improved underwriting results and higher investment income. Adjusted net income was $0.71 per diluted share, compared with an adjusted net loss of $1.10 per diluted share in the prior-year quarter.

Chief Executive Officer Kathy Antonello said the year-over-year earnings improvement was driven primarily by the absence of $38 million in reserve strengthening recorded during the third quarter of 2025. The company’s loss and loss-adjustment-expense ratio improved to 71.2% from 97.1% a year ago, while its GAAP combined ratio improved to 108.4% from 129.7%.

“That is significant progress, but we are not satisfied with that level and will continue to strive for underwriting improvement,” Antonello said.

Premium declines reflect underwriting actions

Gross premiums written declined 18% to $151.1 million, while net premiums earned fell 17% to $160.2 million. Management attributed the reductions to pricing and underwriting measures begun in 2025 to prioritize profitability during what Antonello described as a prolonged soft market.

Policies in force declined 8% to roughly 124,000. Antonello said the smaller reduction in policies relative to premiums reflected the company’s retention of most small-business customers while exiting selected classes of business.

Chief Financial Officer Mike Pedraja said the company’s voluntary-business current accident-year loss and LAE ratio, excluding the loss portfolio transfer, was 72%. Employers did not recognize prior-year development on its voluntary business during 2026, according to Antonello.

The underwriting expense ratio rose to 24.3% from 20.6%, reflecting the smaller premium base, though underwriting expenses themselves fell 1.8% to $38.9 million. Commission expense declined 10.4% to $20.6 million, but the commission expense ratio increased to 12.9% from 12.0%.

Pedraja said the higher commission ratio reflected increased commission rates for new business in 2026, along with a one-time adjustment that reduced the third-quarter 2025 ratio. Antonello told analysts that the company continues to see upward pressure on commissions for new business as carriers compete in the softer market, although Employers is not pursuing higher commissions in every area.

Re-underwriting process expected to conclude in fourth quarter

Antonello said the company’s re-underwriting program has been targeted to specific classes and jurisdictions rather than broadly applied across its portfolio. She said the actions, which began near the end of 2025, are expected to work through the full book by the fourth quarter of 2026.

Once affected policies have been non-renewed or canceled, Antonello said the company expects premiums to stabilize to some extent. She cautioned, however, that growth remains difficult while industry loss costs continue to decline.

On claims trends, Antonello said overall frequency continues to decline nationwide in Employers’ book, driven by claims outside California. California claim frequency has increased in recent accident years, she said, particularly because of cumulative-trauma claims. Excluding cumulative-trauma claims, California frequency through 2025 continued to trend downward, according to Antonello.

The company has seen stable or lower claim severity overall, she added. Early 2026 indications point to possible severity pressure outside California, but Antonello said that was entirely driven by several large losses rather than a broad-based trend.

Employers’ audit accrual stood at approximately $23 million, with no change during the third quarter. The company recognized about $2.3 million of non-compliance premium and reported that cancellations were relatively flat year over year. Antonello said submissions and quotes have increased significantly, which may indicate that agents are shopping business more actively for better pricing or commissions.

Investment income rises as rates and private equity contribute

Net investment income increased 23.8% to $32.3 million, supported by $5.6 million in private-equity investment distributions and higher fixed-income yields following the company’s 2025 investment rebalancing. Excluding private-equity distributions, net investment income was approximately $26.7 million, up 6% from the prior-year period.

The fixed-income portfolio yield reached 5%, up 40 basis points from a year earlier. Pedraja said the portfolio had a modified duration of 4.3 and an average credit quality of A+.

Higher interest rates reduced the market value of fixed-maturity securities, contributing to an increase in accumulated other comprehensive loss of $61.7 million to $74 million. Stockholders’ equity was $785.6 million at quarter-end, down from $858.8 million at June 30. Pedraja said the unrealized losses were related to interest rates rather than credit quality and should reverse as bonds mature or if rates fall.

Book value per share, including the deferred gain, was $49.44, up 2.1% from a year earlier but down 5.3% from the second quarter. Adjusted book value per share was $53.64, up 7.1% year over year and 1.3% sequentially.

New products and technology initiatives

Antonello said Employers’ excess workers’ compensation product, launched in June, had written 31 accounts and $6.5 million in premium through the third quarter. The company has also started developing a large-deductible offering targeted for launch in 2027.

The company said its technology team used artificial intelligence in two-thirds of eligible work tasks during the quarter. A new AI-driven claims-summary application went live after reviewing the company’s inventory of open claims. Antonello said Employers expects the tool to allow its claims team to redeploy more than 50,000 hours over three years.

Employers returned $24.4 million to stockholders during the quarter through $18.1 million in share repurchases and $6.3 million in dividends. The company repurchased 373,848 shares at an average price of $48.44 and had $94.9 million remaining under its 2026 repurchase authorization. Its board also declared a fourth-quarter dividend of $0.34 per share, payable Dec. 3 to stockholders of record on Nov. 12.

About Employers (NYSE:EIG)

Employers Holdings, Inc NYSE: EIG is an insurance holding company specializing in workers' compensation coverage for small and midsize businesses. Through its insurance subsidiaries, the company provides policies designed to cover workplace injuries, related medical expenses, rehabilitation, and wage-replacement benefits.

In addition to underwriting workers' compensation insurance, Employers offers claims management, workplace-safety and loss-control services, risk-management resources, and policyholder support.

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