Employers Holdings ((EIG)) has held its Q3 earnings call. Read on for the main highlights of the call.
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During the recent earnings call, Employers Holdings expressed a sentiment of cautious optimism. The company highlighted positive developments such as an increase in gross written premiums and strategic capital returns. However, these were tempered by significant challenges, particularly related to California cumulative trauma claims, which necessitated reserve adjustments and resulted in a quarterly adjusted net loss. The overall sentiment reflects proactive steps being taken to manage these challenges effectively.
Increase in Gross Written Premium
Employers Holdings reported a 1.4% increase in gross written premiums compared to the previous year, primarily due to increases in renewal business premiums. Net premiums earned rose to $192.1 million, marking a 3% increase from the prior year. This growth underscores the company’s ability to maintain and expand its customer base.
Share Repurchase and Capital Returns
The company announced a significant $125 million debt-funded recapitalization plan, which includes an increase in the existing share repurchase authorization to $250 million. This move reflects Employers Holdings’ commitment to returning value to shareholders, as evidenced by the $52.7 million returned through dividends and share repurchases.
Launch of New Product Offering
Employers Holdings is expanding its product line with the introduction of a new excess workers’ compensation offering. The company plans to start accepting submissions by early 2026, leveraging its existing expertise and systems to enter this new market segment.
Net Investment Income and Gains
The company reported earning $26.1 million in net investment income during the quarter. Additionally, net realized and unrealized gains on investments increased significantly to $21.2 million, compared to $10.9 million in the prior quarter, showcasing strong investment performance.
Increase in Loss and LAE Reserves
Employers Holdings increased its prior year reserves by $38.2 million due to a rise in California cumulative trauma claims. This adjustment led to an increase in the 2025 loss and LAE ratio to 72%, highlighting the impact of these claims on the company’s financials.
Impact on Adjusted Net Income
The company reported an adjusted net loss of $25.5 million, a stark contrast to the adjusted net income of $20.2 million a year ago. This was largely due to the reserve adjustments for cumulative trauma claims, underscoring the financial challenges posed by these claims.
Challenges with California CT Claims
The increased frequency of California cumulative trauma claims has significantly affected Employers Holdings’ reserves, with 90% of these claims being litigated. The company has implemented proactive mitigation strategies to address these challenges, emphasizing aggressive claims handling and litigation management.
Forward-Looking Guidance
Employers Holdings provided detailed guidance for its future financial performance and strategic initiatives. The company remains optimistic about its prospects, despite current challenges. It highlighted a 1.4% increase in gross written premiums and a strategic expansion into the excess workers’ compensation market. The company also emphasized its commitment to aggressive claims handling and maintaining care for injured workers, while declaring a fourth-quarter dividend of $0.32 per share.
In summary, Employers Holdings’ earnings call reflected a balance of positive developments and significant challenges. The company demonstrated a commitment to growth through strategic initiatives and capital returns, while proactively addressing the challenges posed by California cumulative trauma claims. Despite the current hurdles, Employers Holdings remains optimistic about its future prospects.