Employers Holdings Inc

Good day and thank you for standing by. Welcome to the first quarter 2025 Employers Holdings Earnings Conference call. At this time, all participants are on 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'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today. Lori Brown, Chief Legal Officer, please proceed.

Thank you, Kevin. Good morning and welcome everyone to the first quarter 2025 earnings call for employers. Today's call is being recorded in webcast from the investor section of our website where a replay will be available following the call. Presenting today are Kathy Antonello, our Chief Executive Officer, and Mike Pedraja, 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 the SEC's Regulation FD. Such disclosures will be included in the investor section on 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, we 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 investor section of our website. Now, I'll turn the call over to Kathy. Thank you, Lori. Good morning, everyone, and welcome to our first quarter 2025 earnings call. Today, we will follow our typical agenda where I will begin by providing highlights of our first quarter 2025 financial results. I will then hand it over to Mike for more details on our financials. And prior to Q&A, I will come back to you with some additional commentary. Our first quarter net premium earned was relatively flat compared to 2024. This result was driven by higher renewal premium offset by lower new business and audit premium. Rate increases and underwriting actions taken to maintain our underwriting profitability targets in certain states impacted our new business premium. while final audit premium pickup and audit accruals decreased in line with the moderation of employment and wage growth. Despite these headwinds, employers ended the period with another record number of policies in force, with a year-over-year growth rate of 4%. We earned $32 million of net investment income during the quarter, an increase of 20% and meaningfully higher than any other quarter in our history as a publicly traded company. Our current accident year loss and LAE ratio on voluntary business was 66% versus the 64% we maintained throughout 2024. This increase is consistent with our conservative reserving philosophy and the recent loss ratio and pricing trends experienced both at employers and within our industry. Consistent with our normal practice, we did not perform a full loss reserve assessment, as full assessments are performed twice a year in the second and fourth quarters. We'll provide you with details of this analysis and any associated impact on prior year reserves next quarter. I'm pleased with the reductions we achieved in our underwriting expense ratio, which was 23.4% this quarter, down from 25% a year ago. We believe we'll achieve further expense ratio improvement throughout 2025. With that, Mike will now provide a deeper dive into our financial results, and then I'll return to provide my closing remarks.

Mike? Thank you, Kathy. As this is my first official call, I'd like to thank Kathy, Lori, and the broader employers team for welcoming me to this fantastic franchise. I'm very excited about our prospects. For everyone on the call, I look forward to meeting and working with you in the coming weeks. For the quarter, gross premiums written were $212 million, an increase of 1%. The increase was due to higher renewal of business partially offset by lower new business and final audit premiums. As Kathy mentions, prudent pricing actions, and targeted underwriting changes implemented in certain states impacted our new business production, while final audit premiums decreased. Net premiums earned were $183 million, a decrease of 1%. During the period, our losses and loss adjustment expenses were $121 million versus $117 million a year ago. The increase was primarily due to higher current accident near loss and loss adjustment expense ratio, which we increased from 64% to 66%. Commission expense was 23 million versus 25 million a year ago. And our commission expense ratio was 12.6 versus 13.6. The decreases were primarily related to the release of commissions payable associated with non-performing policies sent to collections. Underwriting expenses were $43 million versus $46 million, and our underwriting expense ratio was 23.4% versus 25%. The reduction in this ratio was primarily the result of decreases in debt expense and compensation-related expenses. Our net investment income was $32 million versus $27 million a year ago, an increase of 20%. The increase was primarily due to returns from our investments in private equity limited partnerships, along with higher yields on our fixed maturity securities. These fixed maturity investments currently have a duration of 4.3 years and an average credit quality of A+. Our weighted average book yield was 4.5% at quarter end, which is up nicely from 4.3% a year ago. Our quarterly net income of $12.8 million was unfavorably impacted by $9 million of net after-tax unrealized investment losses generated from equity securities and other investment holdings due to the recent U.S. capital market fluctuations. Our stockholders' equity was favorably impacted by $21 million of net after-tax unrealized gains generated from our fixed maturity investments. Our adjusted net income which excludes unrealized investment gains and losses, and the benefit of our LPT deferred gain amortization totaled 21.3 million, a 24% increase from last year's 17.2 million. During the first quarter, we repurchased 21 million of our common stock at an average price of $49.69 per share. And thus far, in the second quarter, we have repurchased an additional 170,000 shares of our common stock at an average price of $48.35 per share. On Wednesday, our Board of Directors authorized a new stock repurchase program to allow for repurchase of up to 125 million of our common stock over the 20-month period from May 6, 2025 to December 31, 2026. This new program replaces our existing program that was scheduled to expire on July 31st, 2025, but has been exhausted. Also on Wednesday, our board of directors declared a 7% increase in our quarterly dividend to 32 cents per share. The dividend is payable on May 28th to stockholders of record on May 14th. We believe both actions, the increase in our quarterly dividend and the new stock repurchase program, are reflections of our confidence in employers' financial strength and financial prospects. And now I will turn the call back to Kathy.