Employers Holdings Inc (EIG) (Q1 2024) Earnings Call Transcript Highlights: Robust Growth Amid ...
Revenue: Increased by 8% year over year.
Net Investment Income: Decreased by 3%.
Net Income: Rose sharply by 29%.
Gross Written Premium: Increased by 14%.
Net Premiums Earned: Increased by 7%.
Loss and Loss Adjustment Expenses: Increased by 8%.
Commission Expenses: Increased by 9%.
Underwriting and General Administrative Expenses: Increased by 3%.
Combined Ratio: Stood at 101.6%, similar to the previous year.
Dividend: Increased to $0.30 per share, up 7% from the previous quarter.
Stock Repurchase: $5 million at an average price of $39.45 per share.
Book Value Per Share: Increased by 13% to $44.04.
Adjusted Book Value Per Share: Increased by 11% to $47.86.
Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Employers Holdings Inc (NYSE:EIG) reported an 8% increase in first quarter revenue year over year, driven by higher new and renewal premiums, strong net investment income, and investment gains.
Gross written premium increased by 14% for the quarter, with contributions from all major distribution channels.
Net income and adjusted net income per diluted share rose sharply by 29% and 12%, respectively.
The underwriting and general and administrative expense ratio improved to 24.8%, down from 25.7% a year ago, primarily due to the integration of Cerity.
Employers Holdings Inc (NYSE:EIG) launched a best-in-class digital claim reporting tool, receiving positive feedback and enhancing user experience.
Negative Points
The current accident year loss and LAE ratio on voluntary business increased to 64%, slightly above the previous year's 63.3%.
The first quarter 2024 GAAP combined ratio of 101.6% showed no improvement from the first quarter of 2023.
Net investment income decreased by 3% due to the unwinding of the former Federal Home Loan Bank leverage investment strategy.
Commission expense ratio increased to 13.8% from 13.5% a year ago, due to higher initial commission rates on new business premium growth.
Employers Holdings Inc (NYSE:EIG) experienced a $1.05 million incremental bad debt expense related to some noncompliant policies.
Q & A Highlights
Q: Could you break down the 14% growth in the top line after the audit premiums? What builds up to that 14%? A: Katherine Antonello, President and CEO of Employers Holdings Inc, explained that the growth is widespread across all major distribution channels. The core agency segment saw a 9% increase, while the specialty, payroll, and alternative distributions grew by 22%, driven significantly by the digital book and API utilization. The company's appetite expansion effort also contributed, generating $38 million or 18% of new and renewal premium.
Q: Can you detail any one-time expenses in the Q1 expense ratio and expectations for future quarters? A: Michael Paquette, CFO, noted that Q1 savings were as expected with no surprises. Seasonal increases in payroll and benefits were typical. An additional $1.05 million in bad debt expense was a one-time occurrence related to noncompliant policies, which is not expected in future quarters.
Q: How are you accounting for potential increases in medical inflation in your reserves? A: Katherine Antonello mentioned that while current medical inflation remains mild, the company monitors it closely, especially prescription drug costs. Employers Holdings has set aside over $14 million for potential inflation increases, feeling well-prepared should inflation rise.
Q: How do you perceive competition in the market, particularly in terms of new business growth? A: Antonello indicated that the market remains competitive, but Employers Holdings is finding more policies slightly larger than their typical size, which has increased their average policy size by about 9%. The company continues to see a competitive environment without significant changes in other carriers' appetites.
Q: Could you clarify the rate changes and their impact when considering wages and exposures? A: Antonello clarified that the average rate change was a decrease of 5% to 6%. However, when adjusted for exposure and split between wages and employment changes, the decrease is closer to 2% to 4%.
Q: What is your perspective on the pace of industry-wide reserve gains? A: Antonello noted that it's challenging to predict, but last year's increase in reserve redundancy was surprising. She anticipates that the upcoming AIS conference might provide more insights into the industry's reserve status. The industry appears to continue releasing reserves, a trend that Employers Holdings also follows.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
