Employers Holdings Inc

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 that session, you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ms. Lori Brown, General Counsel. Please go ahead.

Thank you, Carmen. Good morning and welcome everyone to the second quarter 2022 earnings call for employers. Today's call is being recorded in webcast from the investors section of our website, where a replay will be available following the call. Presenting today on the call will be Kathy Antonello, our chief executive officer, and Mike Paquette, our chief financial 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 nonpublic information and for complying with disclosure obligations 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 Kathy.

Thank you, Lori, and thanks to everyone for joining us. On today's call, Mike and I will outline our financial results for the second quarter of 2022 and discuss our observations of the current workers' compensation market. We are executing extremely well on our business plan. Consistent with the momentum we have experienced in recent prior quarters, our written and earned premiums increased significantly year over year. This growth resulted from strong new and renewal business writings within our employers segment, strong new business writings within our serity segment, and further audit premium recognition. As a result, our gross premiums written during the quarter and first half are up 22% and 19%, respectively, versus those of a year ago. Our appetite expansion into new markets such as landscaping, residential janitorial, and several artisan contracting classes was a solid driver to this growth. Serity's in-force premium at quarter end was $2.7 million, which represents an increase of 250% over the last four quarters, and was supported by its recent collaboration with Intuit's QuickBooks. Serity continues to develop additional strategic opportunities, which will support our growth initiatives by attracting an untapped segment of our target market. We once again ended the quarter with a record number of policies in force. Our consistent growth in policy count has positioned us well and will continue to generate premium growth as wages rise. Since the pandemic, lower wage workers, especially in our focus industry of leisure and hospitality, have seen the sharpest increase in wages, up 15% for the first quarter of 2022 relative to the prior year. and that has led to robust audit premium recognition. With payroll as the exposure base and indemnity benefits automatically linked to state average weekly wages, the workers' compensation line of business adjusts nicely to changes in wage inflation. We maintained our current accident-year loss and LAE ratio on voluntary business at 64%, largely consistent with the 63.5% we recorded throughout 2021. We also performed our routine mid-year full reserve study and recognized $10 million of net favorable prior year loss reserve development from our voluntary business. We'll complete our next full reserve study at year end. Our underwriting and general and administrative expenses of $39 million were $2 million higher than a year ago. The increase can be attributed to premium taxes, assessments, and a provision for bad debt, each of which vary with our earned premium. Our fixed expenses, those that are within our control and do not tend to vary with our earned premium, were down $1 million from a year ago. The combined impact of lower fixed expenses and higher earned premiums led to a consolidated underwriting and general and administrative expense ratio of 23.8% this quarter, a year-over-year reduction of 320 basis points. This is the lowest consolidated underwriting and G&A expense ratio in 14 quarters and is a direct result of our focus on productivity and efficiency as we grow our top line. While we continue to diligently manage our expenses, we are also committed to technology and digital investments that improve both our customer and workforce experience and position us to scale the business. With that, Mike will now provide a further discussion of our financial results, and then I will return to provide my closing remarks. Mike?