Employers Holdings, Inc. Q3 FY25 Results

“We once again ended the quarter with a record number of policies in-force, which were up 4% year-over-year. Third quarter gross premiums written increased 1%, and net premiums earned increased 3%, with growth in smaller policy size bands and strong renewals offsetting decreases within the middle market. Our ongoing appetite expansion initiative contributed to both policy count and premium growth. Targeted pricing and underwriting actions impacting certain classes and jurisdictions tempered our growth this quarter and confirmed our commitment to improving our underwriting margin over increasing our written premium. Strong investment income and continued net investment gains combined with our premium growth expanded total revenue by almost 7% in the quarter. During the third quarter, we took decisive action after completing a rigorous internal review of our reserves and comparing our selections to those of an external actuarial review performed mid-year. The result of our actions strengthened prior accident year loss and LAE reserves by $38.2 million, or 2.8% of net loss and LAE reserves. Accident years 2023 and 2024 were the primary contributors of the increase, with all remaining years decreasing by $18.4 million. In addition, we increased our accident year 2025 loss and LAE ratio from 69.0% to 72.0%. We believe these adjustments adequately address the recent increase in California cumulative trauma claim frequency, reflect our desire to utilize a more conservative approach across our complete book of business, and are not indicative of a broader issue within our book. If not for the increase in California cumulative trauma claim frequency, we believe the increase in the accident year 2025 loss and LAE ratio and the strengthening of prior year reserves would not have been necessary. We are confident this reserving action, along with our California specific rate and underwriting actions, fully reflects the impact of current loss trends. Our commission expense ratio was 12.0%, versus 13.8% a year ago, driven by lower new business premiums and agency incentive commissions. Our underwriting expense ratio decreased to 20.6% from 23.5% a year ago and 32.1% five years ago. The year-over-year reduction was related to our focused expense initiatives and to lower compensation-related expenses, which primarily arose from a recent reorganization we undertook to better align our resources with our future business objectives. We have made tremendous progress reducing our expense ratio over the last five years by automating the customer journey. Optimizing our capital structure for the benefit of our shareholders is a critical component of our long-term strategy. Earlier this week, our Board of Directors approved a $125.0 million debt-funded recapitalization plan along with a $125.0 million increase to our existing share repurchase authorization, expanding the aggregate share repurchase authority to $250.0 million. In addition to a meaningful return on investment, we believe the recapitalization will reduce our cost of capital, improve our return on equity, and expand our earnings per share and adjusted book value per share. Lastly, we declared a regular quarterly dividend of $0.32 per share, reinforcing our ongoing commitment to delivering shareholder value. These decisive actions reflect the strength of our balance sheet, including its abundant underwriting capital, and the confidence we have in the Company's future.”