Employers Holdings Inc

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the third quarter 2020 Employees Holdings, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone keypad. As a reminder, this conference call is being recorded. If you require any further assistance, please press star then 0. At this time, I would like to turn the conference over to Ms. Lori Brown, General Counsel. Thank you. Ma'am, please begin.

Thank you, Howard. Good morning and welcome, everyone, to the third quarter 2020 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. Presenting today on the call will be Doug Dirks, our Chief Executive Officer, Mike Paquette, our Chief Financial Officer, and and Steve Festa, our Chief Operating Officer. 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. 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 non-public information and for complying with the disclosure obligation under SEC's Regulation FD. Such disclosures will be included in the investor section of the company's website. Accordingly, investors should monitor that portion of the company's website in addition to following the company's press releases, SEC filings, public conference calls, and webcasts. In our earnings press release and in our remarks or responses to questions, we may use non-GAAP financial metrics. Reconciliations of these non-GAAP metrics 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. Now I will turn the call over to Doug.

Thank you, Laurie, and thank you all for joining us today. Our third quarter results were good, considering the continuing challenging macroeconomic environment. And our accident year results were broadly in line with our expectations. Our new business writings were down sharply earlier in the year, but have rebounded since June. We are currently experiencing significant year-over-year increases in new business submissions and binds in nearly all the states in which we operate, with the notable exception of California, which continues to lag all other states. Despite the increases in new business that we have experienced year to date, our new business premium has fallen, driven primarily by a significant decline in policies with premium greater than $25,000. Excluding California, our policies in force were up 1.5% over the previous quarter, and up 12.9% year-to-date, while in-force premium was down 3.4% for the quarter and down 4.6% year-to-date. Unlike most other lines of property and casualty insurance where pandemic-related changes in exposure resulted in broadly applied premium credits, Workers' compensation insurance is self-adjusting to actual exposure for the policy period, either through midterm endorsements or final audit adjustments. Midterm premium endorsements processed in the quarter were a net positive, but final audit adjustments were a negative $15.7 million. The net reduction in our final audit accrual year over year is currently $45.5 million, which represents nearly 50% of the decline in our net written premium year-to-date. Earlier this year, regulatory actions mandated or requested that we suspend cancellations of policies for nonpayment of premiums. These orders or requests were for differing lengths of time, varying by jurisdiction, and have now mostly expired. And we have since resumed routine cancellation activities in most jurisdictions. As a result, our year-to-date results reflect a clearer picture of our anticipated uncollectible premium and bad debt. which proved to be much better than we expected for our enforced premiums receivable and were well within our expectation for final audit receivables. Workers' compensation benefits are uniquely defined by statute and consequently cannot be changed by us through policy terms, but rather can be changed only through legislative action or judicial interpretation. In many states, insurance commissioners, legislatures, and governors have retroactively expanded definitions of compensability and created new presumptions related to virus exposure. Many of the changes have been limited to first responders and frontline healthcare providers. Some states, however, have adopted more expansive categories of workers entitled to compensability presumptions related to COVID-19 exposures. These changes will have a negative impact on ultimate losses for the workers' compensation industry, although we continue to believe our exposure to additional losses from enacted changes are likely to be less impactful given the classes of business we write. In the quarter, we recorded $15 million of favorable prior year loss reserve development, which related to nearly every accident year. Note that in the first quarter of 2020, despite observing favorable loss development in nearly every year, we recognized observed reserve redundancies only for years 2010 and prior. as we believe those years have relatively low exposure to negative recessionary impacts. Our current reserving position continues to reflect our view that there is a higher degree of uncertainty in the loss reserves of more recent years given the increased risk of a prolonged recession. We have invested significantly over the last several years in an operating model that drives superior customer experiences and enhanced efficiencies. As our agents and insurers have adjusted to a different and more challenging operating environment, we believe the solutions we provided them are resulting in more business opportunities for us and more durable relationships with our partners. With that, Mike will now provide a further discussion of our financial results. Steve will then discuss some of the current trends, and then I'll return for a few brief closing remarks. Mike?