Employers Holdings Inc

Good day and thank you for standing by. Welcome to the second quarter 2025 employers holding Inc. earnings conference call. At this time all participants are in listen only mode. After the speakers presentation there will be a question and answer session. To ask a question during this session you will 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 that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Lori Brown, Chief Legal Officer. Please go ahead.

Thank you Marvin. Good morning and welcome everyone to the second quarter 2025 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. 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 the disclosure obligations under the SEC's regulation FD. Such disclosures will be included in the investor 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, we may use non-GAAP financial measures. Reconciliation 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 on our website. And now I'll turn the call over to Kathy Antonello, our Chief Executive Officer. Thank you, Lori. Good morning, everyone, and welcome to our second quarter 2025 earnings call. Joining me today is Mike Padraja, our Chief Financial Officer. During today's call, I'll begin by providing highlights of our second quarter 2025 financial results and then hand it over to Mike for more details on our financials. Prior to Q&A, I'll come back to you with some additional thoughts. Our second quarter gross written premium decreased by .2% compared to 2024 due to a decrease in new business written premium within the middle market. Our focus on profitability over growth led to targeted underwriting actions and improved risk selection, which impacted our ability and desire to grow at the same pace in certain classes and jurisdictions. We are pleased that we continue to grow with our small commercial clients that value our investments in automation and ease of use. Net premiums earned for the quarter increased 5.6%, primarily due to strong increases in net written premium in 2024. We ended the period with a record number of policies enforced with a -over-year growth rate of 4.6%. We earned $27.1 million of net investment income during the quarter, which was slightly higher than the second quarter of 2024. Our current accident year loss in LAE ratio on voluntary business was 69% versus the 66% we recorded in the first quarter of 2025. This increase was a prudent response to the rapid rise in cumulative trauma claims in California in the most recent accident years and the level of uncertainty around this new trend. In addition, while we did not recognize any prior year loss reserve development for voluntary business this quarter, we did reallocate significant favorable loss development from accident years 2020 and prior to accident years 2022 through 2024 to reflect the increased frequency of cumulative trauma claims in California. We intend to perform a full actuarial study in the third quarter. I am pleased with the reductions we achieved in our commission expense ratio, which was .2% this quarter, down from .9% a year ago. We also achieved reductions in our underwriting expense ratio, which was .7% this quarter, compared to .4% a year ago. We continue to find ways to reduce expenses by automating processes, delivering customer self-service capabilities, and utilizing artificial intelligence. With that, Mike will now provide a deeper dive into our financial results, and then I'll return to provide my closing remarks.

Mike? Thanks, Gaby. Gross premiums written were 203.3 million compared to 207.9 million for the prior quarter, a decrease of 2.2%. As Kathy previously mentioned, declines in our middle market new business offset new business premium growth within our smaller customer segment. Net premiums earned were 198.3 million compared to 187.8 million for the prior quarter, an increase of 5.6%. During the period, our loss and loss adjustment expenses were 104.1 million versus 108.8 million a year ago. As Kathy discussed, we increased our current action-year loss and loss adjustment expense In response to the rapid rise in cumulative trauma claims in California, we are experienced. As a reminder, in our first quarter, 2025 reported loss and loss adjustment expenses were based on a loss in LEE ratio of 66%. Accordingly, the current quarter loss and loss adjustment expenses includes a first-quarter catch-up adjustment of 5.5 million, resulting in a 70.7 loss in LEE ratio. Commission expense of 26.1 million was essentially flat compared to a year ago, and our commission expense ratio was .2% versus .9% for the prior period. The reduction in the commission expense ratio was primarily due to the proportional increase in renewal premiums, which carry lower commission rates as well as lower agency incentive commission Underwriting expenses were 43.1 million for the quarter versus 42.2 million for the prior year. Our underwriting expense ratios for the corresponding quarters were .7% and .4% respectively. The underwriting expense increase was primarily related to a reduced internal allocation of underwriting expenses to loss adjustment expenses, resulting from a refinement in our internal assumptions. Excluding this allocation, underwriting expenses decreased by 3 million, primarily driven by lower compensation-related expenses and depreciation to amortization costs, offset by higher bad debt expense. Increased net premiums earned contributed to the lower underwriting expense ratio. Net investment income was 27.1 million for the quarter compared to 26.9 million for the prior year. The slight increase was primarily due to higher yields on our fixed maturity investments. The total investment return for the second quarter was 57.5 million compared to 26.5 million for the prior year. The current quarter net income results included after-tax realized and unrealized gains from our investments in equity securities and other invested assets of 14.8 million and 1.8 million respectively. Our stockholders' equity at June 30, 2025, reflects 7.4 million of net after-tax unrealized gains generated from our fixed maturity investments during the current quarter. Our fixed maturity investments currently have a modified duration of 4.3 and an average credit quality of A+. Our weighted average book yield was 4.5 at quarter end, which is consistent with the year ago. Our adjusted net income, which excludes net realized and unrealized investment gains and losses and the benefit of our LPT deferred gain amortization, totalled 11.5 million, a .8% decrease compared to prior year's adjusted net income of 27.9 million. During the second quarter, we repurchased 23 million of our common stock and an average price of 48.08 per share and thus far have repurchased an additional 229,365 shares of our common stock in the third quarter at an average price of $46.44 per share. With that, I'll turn it back to Kathy.