EIG

LLM Evaluations

Transcript Summary

Employers Holdings, Inc. (EIG) emphasized underwriting discipline in its Q1 2026 earnings call, leading to a 15% decrease in gross premiums written as the company avoided irrational pricing in competitive middle-market segments. Despite the volume decline, the company maintained a 72% loss ratio and improved its underwriting expense ratio to 22.6%. A key focus was the hardening California market, where the company is achieving double-digit rate increases on renewals. EIG demonstrated strong commitment to capital management, returning $83 million to shareholders and authorizing a new $125 million repurchase plan. Furthermore, the company is aggressively integrating AI into its operations, including a first-of-its-kind ChatGPT quoting integration. While management expects top-line pressure to continue through 2026 due to selective underwriting, they are expanding into new areas like excess workers' compensation and increasing market share in attractive jurisdictions. CEO Katherine Holt Antonello remained confident that EIG's strong capitalization and technological edge will drive long-term shareholder value.

5-year share-count history (top 10 holders by peak, incl. exited) + price

Revenue Segments

Filing Risk Scores

EMPLOYERS HOLDINGS, INC.: Standard regulatory compliance filing lacking material forensic triggers.

Full Earnings Call Transcript — Q1 • 2026-04-30

Operator: Good day, and thank you for standing by. Welcome to the first quarter 2026 Employers Holdings, Inc. earnings conference call. There will be a question-and-answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Senior Vice President, Treasury Investments. Please go ahead.
Matthew: Thank you, operator. 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 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 the actual results to be materially different from our expectations, including the risks set forth in our filings with the Securities and Exchange Commission. All remarks made during the call are current only at the time of the call and will not be updated to reflect subsequent developments. The company also uses its website as a means of disclosing material nonpublic information and for complying with disclosure obligations under the SEC's Regulation FD. Such disclosures will be included in the Investors 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. In our earnings press release and in our remarks or responses to questions, you 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 Investors section on our website. I will now turn the call over to Katherine Holt Antonello, our Chief Executive Officer.
Katherine Holt Antonello: Thank you, Matthew. Good morning, everyone, and welcome to our first quarter 2026 earnings call. Joining me today is Michael Aldo Pedraja, our Chief Financial Officer. I will begin by providing highlights of our first quarter 2026 financial results and then hand it over to Michael for more details on our financials. Before our Q&A, I will come back to you with some additional thoughts. If I had to characterize this quarter in a single word, it would be discipline. We made a deliberate choice to prioritize underwriting quality over volume, and the numbers reflect that conviction. Our underwriting expense ratio improved, our actuarial estimates came in on target, and we returned $83 million to shareholders while growing book value per share, including the deferred gain, by 8.9%. That same discipline positions us well to capitalize on favorable market development, including the continued shift in the California rate environment. The California Bureau voted earlier this month to submit a second consecutive double-digit pure premium rate increase to the Commissioner, consistent with the underwriting conditions we have observed throughout the state. As we discussed last quarter, we expect pricing and underwriting actions will pressure growth throughout 2026. Our earned premium was essentially flat year over year, down 1%. The steps we took in certain jurisdictions and segments in 2025 are working as intended. New growth opportunities are now taking shape, including entering new underwriting segments, appointing new agents, and our recently launched excess workers’ compensation product. Profitable growth remains our North Star. Our first quarter actuarial review confirmed the adequacy of our prior-year reserves, with no strengthening required. We recognized a current accident year loss and LAE ratio of 72%, which is consistent with our 2025 accident year ratio. After delivering a record level of $215 million in capital to our shareholders in 2025, we continued our commitment by returning an additional $83 million in the first quarter through share repurchases and regular quarterly dividends. We also completed the $125 million new debt issuance associated with the recapitalization plan through cost-effective sources of $105 million from the Federal Home Loan Bank and $20 million from our credit facility, resulting in a weighted average pretax interest rate of 4.1%. These capital management steps reflect our continued confidence in our financial position, and commitment to delivering value to our shareholders. Along with our operational performance, these actions increased our book value per share, including the deferred gain, to $51.26. We believe our focus on disciplined underwriting, prudent risk management, and strategic investments continues to position us strongly in the workers’ compensation insurance market. With that, Michael will now provide a deeper dive into our first quarter financial results, and then I will return to provide my closing remarks.
Michael Aldo Pedraja: Thank you, Kathy. Gross premiums written were $181 million compared to $212 million for the prior year, a decrease of 15% due primarily to a reduction in new business writings. Our losses and loss adjustment expenses were $129 million versus $121 million a year ago. The current quarter did not include any prior-period developments on our voluntary business, and the current accident year loss and LOE ratio of 72% is consistent with our 2025 accident year ratio. Commission expense was $24 million for the quarter, versus $23 million for the prior year, an increase of 3%, primarily driven by a nonrecurring 2025 favorable adjustment. Underwriting expenses were $41 million for the quarter, versus $43 million for the prior year, a decrease of 5%. The improvement in underwriting expenses for the quarter was due primarily to our continued expense management efforts, including reduced personnel costs and other variable costs such as policyholder dividends. Excluding returns from private equity partnership investments, our first quarter net investment income exceeded last year’s by $1.5 million. This outperformance was aided by the increased book yields and investment redeployment achieved through last year’s investment rebalancing. Our fixed maturities maintained a modified duration of 4.4 with a strong average credit quality of A+. Aided by our investment rebalancing, our weighted average book yield was 4.9% at quarter end, compared to 4.5% for the prior year. Our adjusted net income, which excludes net realized and unrealized investment gains and losses, and the benefit of our LPT deferred gain amortization, was $10.3 million for the quarter compared to $21.3 million last year. During the quarter, we repurchased over 1.8 million shares of our common stock at an average price of $42.42 per share, or $76.9 million. The average repurchase price represented a 17% discount to our book value per share, including the deferred gain. During the period from 04/01/2026 through 04/28/2026, the company repurchased a further 353 thousand 547 shares of its common stock at an average price of $42.21 per share. As we have highlighted, we aim to be good stewards of our shareholders’ capital. At current price levels, we are convinced that Employers Holdings, Inc. stock is meaningfully undervalued, and executing share repurchases at these price levels produces a compelling return on investment and generates significant value for our continuing shareholders. With that, I will turn the call back to Kathy.
Katherine Holt Antonello: Thank you, Michael. Yesterday, our Board of Directors declared a second quarter 2026 dividend of $0.34 per share, representing a 6.25% increase from the prior quarter. In addition, the Board approved a new $125 million share repurchase authorization through 12/31/2027. Operational discipline continued to drive results. Our underwriting expense ratio improved to 22.6%, compared to 23.4% a year ago. As I highlighted last quarter, we are convinced that our utilization of artificial intelligence tools will be a force multiplier, allowing our colleagues to be more efficient and effective. Last month, we brought together approximately 400 employees from across the country to introduce our strategy for implementing AI throughout the organization. The enthusiasm both at the event and in the weeks since have been overwhelmingly positive, and we believe we are creating an innovative culture that will drive differentiated results. We have now moved from AI experimentation to deployment of products using AI. Our vision is that AI will play an increasing role in how we operate going forward. The capabilities that supported our rapid entry into excess workers’ compensation are now being used to improve underwriting insights, automate premium audit and claims operations, and engage our customers. We are convinced that our monoline focus, relatively small size, and flat organizational structure will be an advantage for us as we accelerate AI into every aspect of our company. We recently became the first insurance carrier to bring quoting directly into ChatGPT, made possible by our patented technology, which we designed to reach business owners where and how they engage. Rather than waiting for the industry to define this channel, we defined it ourselves. That is the kind of culture and capability that distinguishes Employers Holdings, Inc., and it is what we will continue to build on. We believe Employers Holdings, Inc. is well positioned and well capitalized to achieve our goals. With total capitalization of approximately $1 billion, a strong A.M. Best A rating, and technology-enabled distribution that can reach customers where they engage, we are in a position to deliver lasting value for our shareholders, customers, and colleagues. We will now open the call for questions.
Operator: As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. Our first question comes from Mark Douglas Hughes with Truist. Your line is open.
Mark Douglas Hughes: Hey, Kathy. Hey, Michael. Good morning. Could you talk about the competitive environment in California? You described the proposed another double-digit rate increase. How much are you realizing in the California market? Is the broader market—the competition—did they follow suit with the first rate increase? How do you see things developing there?
Katherine Holt Antonello: Yes. Let me talk, if you do not mind, about pricing in general and then we can get into California. When I think about pricing across workers’ compensation, especially in guaranteed cost, I would say I used to characterize the pricing environment as competitive. I would now say it is closer to getting somewhat irrational in some jurisdictions and premium bands. Specifically, I would call out guaranteed cost middle market. We are seeing that there are some diligent carriers—and I think we are included in that group—exiting certain states and classes. Some of the states that I would mention, not specific to us but just across the market that we have seen exits, are New York, California, and Massachusetts. We are also seeing tightening risk selection in states like Florida, where there is not a lot of pricing flexibility to begin with. For us, we pulled back significantly in Massachusetts, and we have also pulled back in certain class codes. We have also cut ties with a few MGAs that we feel were underperforming. I do not believe that all companies are being as forward-looking as we are in terms of rate adequacy. In certain jurisdictions, including California, it is possible that the market in certain jurisdictions has really crossed over into what I would call cash flow underwriting. You asked about the rate that we are achieving. When we look at our book of business and when we adjust for changes in the mix of business, meaning class code mix, and we compare 2026 to 2025, payrolls were up about 0.5%, and our average rate on renewals countrywide increased about 6%. So that is quarter over quarter, 2026 to 2025. I would say a significant portion of that is coming from California, where we are getting double-digit rate increases on our renewals. When we look at where our opportunities for growth are, I would include segments where we have a differentiated distribution strategy. I am speaking to payroll partners and digital agents/marketplaces; we are still seeing a lot of growth opportunity there. We have also identified some jurisdictions where we have opportunities to increase our market share and where the pricing margins remain very attractive. So we are focusing heavily on those areas, and I would include what I said in the prepared remarks: we are appointing more agents in the areas where we feel like there is better pricing margin, and perhaps in certain states where we entered that state maybe four or five years ago pre-COVID, but we feel like it is now a good time to increase our market share there. I would like to add that at the top of our funnel, when we look at submissions coming in, California does appear to be a hardening market to some extent because submissions were the highest that we have seen across the company—and specifically in California—in 2026 that we have ever seen. So submissions at the top of the funnel, including both count and premium, are very high at this time. We are just being very specific about where we are willing to quote, and where we feel like the pricing is unreasonable, we are just not playing there. In terms of growth, I would also say our appetite expansion effort has been huge. It has been an area of growth for us over the last four years since we started doing that, and we are going to continue to do that going forward and enter into new products like excess and others that we have on the horizon.
Mark Douglas Hughes: Appreciate all that detail. When you describe closer to irrational, can you apply that broadly? You talked about specific jurisdictions where you are seeing pressure, but if you were to categorize the whole market, would that closer to irrational still apply?
Katherine Holt Antonello: I would not broad-brush it. Specifically, I would say the first place that we saw this happening—and this was even last year—in the middle market space, the first-dollar middle market space became very competitive and continues to be competitive, to the point where we are just not willing to quote in certain instances where we feel like the margin is not there.
Mark Douglas Hughes: How about the outlook for reserve development? You have talked about you know, only maybe a Q2/Q4 where you do the reserve development, you have the potential for favorable or adverse, I guess. On a go-forward basis, would you say at least for the time being it is probably balance sheet—you would be protecting the balance sheet rather than recognizing any favorable that might emerge—or will that be more dependent on just what you see?
Katherine Holt Antonello: I think it would be the latter. It is going to be more dependent on what we see and how compelling the numbers are. You are correct in stating we do an actual versus expected analysis at the end of Q1 and Q3. At the end of Q2 and Q4, we do a full analysis where we reselect development factors, and it is a much deeper dive. We have always said that in Q1 or Q3, if we saw something very compelling, we would likely make a move; we would not wait. This quarter, there are always puts and takes depending on how you divide the data, but everything came in right around where we expected, so we did not feel compelled to make a change. We will wait and see how things develop in Q2 and make a decision then as to whether or not we would act on favorable development.
Mark Douglas Hughes: Michael, the audit premium impact in the quarter—how much did it help or hinder the growth?
Michael Aldo Pedraja: It is relatively small—about a $5 million adjustment in the first quarter. We are seeing premiums generally, and as we talked about last time, payrolls moderating. Payroll increases are not developing as they were after COVID. We see a really moderating level of payrolls currently, and we see that into the future.
Mark Douglas Hughes: Kathy, what are your spidey senses telling you about what NCCI is going to say in a week or two about reserve adequacy, medical inflation—kind of the hot button?
Katherine Holt Antonello: I am not deep into the numbers like I used to be. I do not have as much insight being an outsider from NCCI now. But my gut would say that accident year 2025 will continue to show a slight increase, and that has been the case over the last few years. I would expect the level of redundancy for the industry as a whole to decrease. In terms of inflation, we are not seeing anything significant that is impacting our book of business. We continue to track—we have an internal prescription drug index—and it is up slightly, but it is not what I would call anything alarming. You would expect it to be up slightly. From what I am expecting them to present, I would not see anything significant come through on inflation or medical severity.
Mark Douglas Hughes: Thank you very much.
Operator: Thank you, Mark. As a reminder, to ask a question, please press 11. Our next question comes from Karol Chmiel with Citizens. Your line is open.
Karol Chmiel: Hi, good morning. Just a question regarding the top line. With the quarterly decline, and with the context of the planned multiquarter nonrenewal of certain business classes, would you categorize it as ahead of expectations in terms of timing?
Michael Aldo Pedraja: Yes. Hey, Karol. How are you? I think this is exactly as we expected and planned. Last quarter we indicated that we expected to continue that level of teens-type reduction. We expect to have that same level of performance throughout the rest of the year.
Katherine Holt Antonello: I would agree, and having said that, we are opening new markets and new segments like I mentioned earlier in my response to Mark. We are expecting something similar throughout 2026, but we will be introducing new areas throughout the year too.
Michael Aldo Pedraja: That is a really good point. I think towards the end of the year you will start to see all the adjustments we have made flow through, and then we expect to see that transition start to be visible through the results.
Karol Chmiel: Excellent. Thank you for the detail.
Katherine Holt Antonello: Thanks, Karol.
Operator: Thank you. Again, that is 11 to ask a question. I am showing no further questions at this time. I would now like to turn it back to Katherine Holt Antonello for closing remarks.
Katherine Holt Antonello: Thank you, Daniel, and thank you, everyone, for joining us this morning. We look forward to meeting with you again in July.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.