Q3 2024 Employers Holdings Inc Earnings Call
Okay.
Thank you for standing by and welcome to the employers Holdings, Inc. 's third quarter 2024 earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if your question has been answered.
Operator: 3rd Quarter 2024 Earnings Conference Call. there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. If your question has been answered, like to remove yourself from the queue, simply press star 11 again.
And you'd like to remove yourself from the queue simply press Star one one again as a reminder, today's program is being recorded.
Operator: As a reminder, today's program is being recorded.
Lori Brown: And now I'd like to introduce your host for today's program, Lori Brown, General Counsel.
Now I'd like to introduce your host for today's program Lori Brown General Counsel. Please go ahead.
Operator: Please go ahead. Thank you, Jonathan.
Katherine Antonello: Good morning and welcome everyone to the third quarter 2024 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. 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: Thank you Jonathan Good morning, and welcome everyone to the third quarter of 2024 earnings call for employers today's call is being recorded and webcast from the investors section of our website, where a replay will be available. Following the call statements made during this conference call that are not based.
Lori Brown: Non historical facts are considered forward looking statements.
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.
Operator: All remarks made during the call are current only at the time of the call and will not be updated to reflect subsequent development.
All remarks made during the call are current only at the time of the call and will not be updated to reflect subsequent developments.
Operator: The company also uses this website as a means of disclosing material non-public information and for complying with disclosure obligations under the Securities sorry, under the SEC's regulation FD. Some disclosures will be included in the Investor section of 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.
Company also uses its website as a means of disclosing material nonpublic information and for complying with disclosure obligations under the securities.
Alright under the Sec's regulation FD.
Lori Brown: Some disclosures will be included in the investors section of our website.
Accordingly investors should monitor that portion of our website. In addition to the in addition to following our press releases SEC filings public conference calls and Webcasts.
Operator: 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 on our website.
In our earnings press release and in our remarks or responses to your 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 mature.
Available in the investors section on our website and now I'll turn the call over to our Chief Executive Officer Kathy Antonella.
Katherine Antonello: And now I'll turn the call over to our Chief Executive Officer, Kathy Antonello. Thank you, Lori. And let me echo your words earlier with a warm welcome to everyone participating in today's call. Joining me today is Mike Paquette, our Chief Financial Officer. During the call, we will follow our typical agenda where I will deliver my opening comments and then hand it over to Mike to provide the details on our financials. I'll close with a few additional thoughts, and then we'll open it up for questions, comments, and discussion. We are very pleased with employers third quarter results, as we saw year over year net income per share increased by 124% and adjusted net income per share increased by 19%.
Thank you Marie and let me Echo your words earlier with a warm welcome to everyone participating in today's call.
Kathy Antonella: Joining me today is Mike Paquette, our Chief Financial Officer.
During the call we will follow our typical agenda, where I want to live on my opening comments.
And then hand, it over to Mike to provide the detail on that.
Angela.
I'll close with a few additional thoughts and then we'll open it up for questions comments and discussion.
Lori Brown: We are very pleased with employers third quarter results as we saw in year over year net income per share increased by 124% and adjusted net income per share increased by 19%.
Katherine Antonello: higher earned premiums, strong net investment income, and continued net investment gains were the main drivers of the increase. Our strong operating results, coupled with the sharp decrease in interest rates experienced during the quarter, listed each of our book value per share metrics to all-time high. During the quarter, we continue to grow our new and renewal premiums while experiencing reductions in both premium audit pickup and audit accrual. Our current accident-to-year loss in LAE ratio on voluntary business was 64 percent, slightly above the 63.3 percent we maintained throughout 2023 and consistent with that of 2022. As was the case in the third quarter of 2023, we did not recognize any prior year loss reserve development on our voluntary business because the full actuarial study was not performed.
Higher earned premium strong net investment income and continued net investment gains were the main drivers of the yen.
Our strong operating results coupled with the sharp decrease in interest rates experienced during the quarter lifted each of our book value per share metrics to all time high.
During the quarter, we continue to grow our new and renewal premiums while experiencing reductions in both premium audit pickup and audit are cool.
Our current accident year loss and LAE ratio on voluntary business with 64%.
Slightly above the 63, 3%, we maintain throughout 2023 and consistent with that of 2022.
As was the case in the third quarter of 2023, we did not recognize any prior year loss reserve development on our voluntary business.
Because the whole actuarial study was not report.
Katherine Antonello: We will evaluate our prior year reserves in more detail at year end when we routinely perform a full reserve study. Our ongoing initiative to reduce our underwriting and general and administrative expense ratio continues to be effective. This quarter's ratio of 23.2% is down from 23.6% a year ago and is the second lowest since 2018. The decrease was primarily the result of the integration plan we executed in the fourth quarter of 2020.
Lori Brown: We will evaluate our prior year reserves in more detail at year end, when we routinely perform a full reserve study.
Lori Brown: Okay.
Lori Brown: Yeah.
Lori Brown: Our ongoing initiatives to reduce our underwriting and general and administrative expense ratio continues to be effective.
Lori Brown: This quarters ratio of 23, 2% is down from 23, 6% a year ago and this is the second lowest since 2018.
The decrease was primarily the result of the Saturday integration plan, we executed in the fourth quarter of 2023.
Michael Paquette: With that, Mike will now provide a deeper dive into our financials, and then I will return to provide my closing remarks. Thank you, Kathy. Gross premiums written were $181 million, a decrease of 8%. The decrease was primarily due to higher new and renewal business writings being more than offset by lower final audit premiums and endorsements. that premiums earned were $187 million, an increase of 1%. Our losses and loss-adjustment expenses were $118 million versus $115 million a year ago, and our loss and loss-adjustment expense ratio, excluding the LPT, was 63.9 percent versus 63.2 percent. The increase in loss-adjustment expenses was primarily due to higher earned premiums and a slightly higher current accident year loss and loss-adjustment expense estimate.
With that Mike will now provide a deeper dive into our financials and then I'll return to provide my closing remarks, Mike.
Lori Brown: Kathy.
Gross premiums written were $181 million a decrease of 8%. The decrease was primarily due to higher new and renewal business writings being more than offset by lower final audit premiums and endorsements.
Net premiums earned were $187 million, an increase of 1%.
Our losses and loss adjustment expenses were $118 million versus $115 million, a year ago, and our loss and loss adjustment expense ratio. Excluding the LPT was 63, 9% versus 63, 2% the.
Lori Brown: The increase in.
Lori Brown: In Washington loss adjustment expenses was primarily due to higher earned premiums.
And a slightly higher current accident year loss and loss adjustment expense estimate.
Michael Paquette: Commission expenses were $26 million versus $27 million a year ago and our commission expense ratio was 14.1% versus 14.5%. The decrease in our commission expense ratio is primarily related to a decrease in anticipated 2024 agency incentives, which are specific to individual contracts and vary with agency targets. Underwriting and general and administrative expenses were $43 million versus $44 million, and our underwriting and general expense ratio was 23.2% versus 23.6%. Our net investment income was $27 million for the quarter versus $26 million a year ago, an increase of 3%. The increase was primarily due to higher yields on our fixed maturity securities.
Commission expenses were $26 million versus $27 million, a year ago, and our commission expense ratio was 14, 1% versus 14, 5%.
Lori Brown: The decrease in our commission expense ratio was primarily related to a decrease in anticipated 2020 for agency incentives, which are specific to individual contracts and very with agency targets.
Underwriting and general and administrative expenses were $43 million versus $44 million and our underwriting and general expenses.
Lori Brown: Ratio was 23, 2% versus 23, 6%.
Lori Brown: Our net investment income was $27 million for the quarter versus $26 million a year ago, an increase of 3%. The increase was primarily due to higher yields on our fixed maturity securities.
Michael Paquette: When considering the million dollars of interest expense we incurred in the third quarter of 2023 through our federal home loan bank leveraged investment strategy, which we unwound in the fourth quarter of 2023, our net investment income was up seven percent year over year. Our fixed maturities currently have a duration of 4.2 and an average credit quality of A+. Our weighted average book yield was 4.4% at quarter end, which is up nicely from 4.1% a year ago. Our net income this quarter was favorably impacted by $10 million of net after-tax unrealized gains generated predominantly from equity securities and other investment holdings, both of which are reflected on our income statement.
When considering the $1 million of interest expense, we incurred in the third quarter of 2023 through our federal home loan Bank leveraged investment strategy, which we unwound in the fourth quarter of 2023, our net investment income was up 7% year over year.
Our fixed maturities currently have a duration of four two and an average credit quality of a plus.
Our weighted average book yield was four 4% at quarter end, which is up nicely from four 1% a year ago.
Our net income this quarter was favorably impacted by $10 million of net after tax unrealized gains generated predominantly from equity securities and other investments holdings.
All of which are reflected on our income statement and our stockholders' equity was favorably impacted by $52 million of net after tax unrealized gains generated from fixed maturity holdings, which are reflected on our balance sheet.
Michael Paquette: And our stockholders' equity was favorably impacted by $52 million of net after-tax unrealized gains generated from fixed maturity holdings, which are reflected on our balance sheet. During the third quarter, we repurchased $7 million of our common stock at an average price of $45.27 per share. And thus far, we have repurchased an additional million dollars of our common stock in the fourth quarter at an average price of $47.45 per share. Our remaining share repurchase authority currently stands at $39 million.
During the third quarter, we repurchased $7 million of our common stock at an average price of $45 27 per share and thus far we have repurchased an additional $1 million of our common stock in the fourth quarter at an average price of $47 45 per share.
Lori Brown: Our remaining for our remaining share repurchase authority currently stands at $39 million.
Michael Paquette: And yesterday, our Board of Directors declared a fourth quarter 2024 regular quarterly dividend of 30 cents per share. This dividend is payable on November 27th to stockholders of record on November 13th.
And yesterday, our board of directors declared a fourth quarter 2020 for regular quarterly dividend of <unk> 30 per share. This.
This dividend is payable on November 27th to stockholders of record on November 13th.
Katherine Antonello: And now I'll turn it back to Kathy. Thank you, Mike. Our Appetite Expansion effort, which has led to profitable growth, continues to be a large contributor to the 7% increase in premiums that we've achieved year-to-date, excluding adjustments from premium audits. Our loss ratios in these new segments continue to be in line or better than our traditional segments, and we expect to further benefit from this strategy well into the future.
Cathy: And now I'll turn it back to Cathy.
Cathy: Thank you, Mike our appetite expansion effort, which has led to profitable growth continues to be a large contributor to the 7% increase in premium that we've achieved year to date, excluding adjustments from premium on it.
Our loss ratios in these new segments continue to be in line or better than our traditional segments and we expect to further benefit from this strategy well into the future.
Katherine Antonello: And finally, we returned $15.1 million to our stockholders this quarter through a combination of share repurchases at an average price that was highly accretive to our adjusted book value per share and through regular quarterly dividends.
And finally, we returned $15 $1 million to our stockholders this quarter through a combination of share repurchases at an average price that was highly accretive to our adjusted book value per share and through regular quarterly dividends.
Operator: And with that, Operator, we will now take questions. Certainly. Once again, if you have a question at this time, please press star 1-1 on your telephone.
And with that operator, we will now take questions.
Lori Brown: Certainly.
Once again, if you have a question at this time. Please press star one on your telephone. Our first question comes from the line of Mark Hughes from <unk> Securities.
Mark Hughes: Our first question comes from the line of Mark Hughes from True. Yeah, thank you. Good morning. Good morning, Maura. morning. Your appetite expansion, the 7% year to date, I think that was a little bit less in the third quarter. What do you think the growth prospects are, you know, just the pace of the appetite expansion, is that? to sort of run its course and You need to take another... you know, another look at the market and look for some new class codes or how should we think Yeah, so I don't think it's run its course.
Yes. Thank you good morning.
Good morning, Mark.
Good morning.
Your appetite expansion, the 7% year to date I think.
Lori Brown: Maybe it was a little bit less in the third quarter.
What do you think the growth prospects are.
The pace of the appetite expansion is that.
Lori Brown: Sort of run its course and.
Lori Brown: You need to take another.
Another look at the market.
Lori Brown: Look for some new clients codes or how should we think about that.
Yeah. So I don't think it's run its course, we are we have what we call our appetite working group and they are still working and looking to find new class codes that fit in with who we are and we continue to expand in fact.
Katherine Antonello: We are, we have what we call our appetite working group and they are still working and looking to find new class codes that fit in with who we are and we continue to expand. In fact, we, we did expand towards the end of the 3rd quarter. Our appetite. At the same time, we also look to find class codes that are not performing to the extent that we feel like they should. And so at times we pull back too, but there's no intention at all to to put to bed that strategy. And we continue to find places where we can grow profitably, and we will continue to do that end of 2025 and beyond.
Lori Brown: We did expand towards the end of the third quarter our appetite.
Lori Brown: At the same time.
We also look to provide class codes that are not performing to the extent that we feel like they shut in and so at times, we pulled back too.
There is no intention at all to.
Lori Brown: Put them inside that strategy and we continue to find places where we can grow profitably and we will continue.
Lori Brown: Continue to do that end of 2025 and beyond.
Katherine Antonello: You know, until we can't find folks anymore that fit our appetite. Yeah, the audit premium in 3Q sounds like it's decelerated a bit and maybe it's picked back up in October. Is there anything you've been able to put your finger on as to why you saw the lull? in the period. We haven't been able to put our finger on anything specific, but we have some, you know, high-level things going on within the economy that we think may have contributed. I actually, you know, was looking at, the NCCI came out with a quarterly economic briefing yesterday, and one of the key themes or takeaways from that report was that the labor market slowed meaningfully over the summer, and then it picked back up in September.
Lori Brown: Until we can't find hope anymore.
Lori Brown: Alright.
Yes, the audit premium.
Lori Brown: <unk> it sounds like it.
Decelerated a bit maybe it's picked back up in October.
There anything you've been able to put your finger on.
Why you saw the lull.
In the period.
We haven't been able to put our finger on anything specific but we have some high level.
Things going on within the economy that we think May have contributed I actually was looking at the NCI came out with a quarterly economic briefing yesterday and one of the key themes are takeaways from that report was that the labor market slowed meaningfully.
Over the summer and then it picked back up in September and I found that to be very interesting and.
Katherine Antonello: And I found that to be very interesting and sort of synonymous with what we saw over the summer, and now we're seeing in October. They also said that they expect more volatility in employment growth and some only modest hiring pace upcoming. So, that was very similar to what we saw, but there is some volatility out there. It's a very, very difficult number to predict. But, you know, so as the audit premiums have been coming down, we've been decreasing our auditor pool. And as you know, that has an impact on that written premium, which is why we have started sharing the numbers with and without those adjustments.
Sort of synonymous with what we saw over the summer and now were seeing in October.
Lori Brown: They also said that they expect more volatility in them, we might growth and.
Lori Brown: Only modest hiring pace.
Upcoming so that was very similar to what when you saw.
Lori Brown: But there is some volatility out there, it's a very very difficult number to project.
Lori Brown: <unk>.
But you know so as the audit premiums have been coming down we've been decreasing our audit accrual and as you know that has an impact on net written premium.
<unk> is why we have started sharing the numbers with and without those adjustments.
Katherine Antonello: Yeah. Anything from the your payroll partners around that summer lull and pace of new business? Anything to divine there? I haven't heard anything from the payroll partners on that front. I can say that our growth that we've seen continues to be widespread, whether, you know, it's coming from our independent agent channel, which is what we call our core channel, but we're also seeing tremendous growth on the digital side. You know, one thing that I do want to point out is our policies in force during the third quarter of 2024 increased by more than they did in the first or second quarter of 2024.
Lori Brown: Yes.
Anything from the payroll partners around the summer lull or pace of new business.
Anything to divine there.
Haven't heard anything from the payroll partners on that front.
I can say that our growth that we've seen continues to be widespread whether it's coming from our independent agent channel, which is what we call our core channel, but we're also seeing tremendous growth on the digital side.
One thing that I do want to point out is our policies enforced during the third quarter of 2024.
<unk> increased by more than they did in the first or second quarter of 2024.
Katherine Antonello: So, the growth that we saw in the third quarter came from the smaller policy size bands, and that was one of the contributors to the fact that our growth, while we did grow, wasn't quite as strong in the third quarter. Yeah. What's your, uh... prognostication for what the NCCI will come up with in terms of aggregate loss cost. When we think about 2025, how do you think that'll trend? Um You know, I think from what I've seen so far, the filings that are going to be effective on 1-25 and forward, all of the bureaus, you know, continue to show downward pressure on loss costs.
Lori Brown: So the growth that we saw in the third quarter came from small smaller policy size band and that was one of the contributors to the fact that our growth while we did grow wasn't quite as strong in the third quarter.
Lori Brown: Yeah.
Lori Brown: Sure.
Lori Brown: Prognostication for what's in <unk>.
Lori Brown: <unk> come.
Come up with in terms of aggregate loss costs.
Lori Brown: <unk>.
Speaker Change: When we think about 2025, how do you think that will trend.
Lori Brown:
I think from what I've seen so far the borrowings that are going to be effective one $1 25 and forward.
Lori Brown: The all of the bureaus continue.
Sure downward pressure on loss cost and that's driven by the same things that we've seen in the past decreases in frequency in and very moderate changes in severity.
Mark Hughes: And it's driven by the same things that we've seen in the past, decreases in frequency and very moderate changes in severity. So, you know, I really, I don't have a crystal ball in terms of what will happen beyond what they have already filed, but I'm not seeing too much of a change there in terms of what they're filing. Now, I will point out that, you know, in every state, except Florida, we can adjust our prices to what we feel is appropriate for our book of business. And we continue to do that. Yeah. Thank you very much.
So I really I don't have a crystal ball in terms of what will happen beyond what they have already filed but I'm not saying too much of a change there in terms of one of their filings now I will point out that.
In every state, except Florida, we can adjust our prices to what we feel is appropriate for our book of business and we continue to do that.
Lori Brown: Yes.
Speaker Change: Thank you very much.
Operator: All right.
Operator: Thank you, Mark. Once again, ladies and gentlemen, if you do have a question... press star 1-1-1.
Speaker Change: Alright, Thank you Mark.
Thank you and once again, ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone.
Speaker Change: Yeah.
Operator: showing any further questions that.
And I'm not showing any further questions at this time I'd like to hand, the program back to Kathy Antonello for any further remarks.
Katherine Antonello: I'd like to hand the program back to Kathy Antonello for any further remarks. Okay, thank you all for joining us this morning and I look forward to meeting with you again in February to discuss our year-end results. Thank you, ladies and gentlemen, for your participation today.
Okay. Thank you all for joining us this morning, and I look forward to meeting with you again in February to discuss our year end results.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Operator: This does conclude the program. You may now disconnect. Good day.
Speaker Change: Okay.
Speaker Change: Okay.
Operator: Thank you for watching!
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
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