Employers Holdings Inc

Thank you, operator. Good morning. And welcome, everyone, to the fourth 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 of 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 disclosures 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. 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 Cathy Antonella, our Chief Executive Officer.

Thank you, Matt. Good morning, everyone, and welcome to our fourth quarter 2025 earnings call. Joining me is Mike Pedraja, our Chief Financial Officer. During today's call, I will begin by providing highlights of our fourth quarter 2025 results and then hand it over to Mike for more details on our financials. Before our Q&A, I'll come back to you with some additional thoughts. I'd like to begin with how we are actively addressing the elevated frequency of California cumulative trauma claims. To be clear, this remains a California-specific issue. Claim frequency in our other states and within non-CT claims in California continues to trend favorably. We recognized early that the CT environment was creating a hard market in California, and we moved decisively. We have implemented rate increases and tightened underwriting restrictions on several classes of business. We are not waiting for legislative reform, though we do believe the growing impact on California businesses and public agency budgets will make the case for reform increasingly difficult to ignore. While we're confident that these California pricing and underwriting actions, along with the steps we're taking across the country, will strengthen our underwriting profitability, they are also likely to reduce written premium in 2026. It's worth highlighting that our small commercial franchise maintains strong retention rates throughout 2025, a clear sign the investments we've made in automation and ease of use are genuinely resonating. I'm also pleased to report that our standard fourth quarter full actuarial assessment concluded that no additional reserve strengthening or adjustments to our current accident year loss in LAE ratio was necessary. In addition to our internal analysis, we engaged a market-leading actuarial firm to independently assess our estimated ultimate loss, and they concluded that our carried reserves were well within the range of reasonable estimates. We believe the outcome of these two analyses confirms the actions we took in the third quarter adequately addressed recent workers' compensation trends. I'm excited to discuss our new excess workers' compensation product, which represents a strategic expansion of our capabilities. By leveraging our core workers' compensation expertise into the excess layer, we're creating new growth avenues while diversifying our risk profile. Our aggressive adoption of AI tools has accelerated the product's development, and I'm pleased to report that we are now accepting submissions. The early market response has been strong, and we expect this product will deepen our distribution partner relationships while expanding our addressable market. We continue to execute on our commitment to returning capital to stockholders by delivering $215 million of share repurchases and regular quarterly dividends in 2025. In January, we completed the $125 million capital recapitalization plan that we announced in the third quarter. These capital management steps reflect our continued confidence in our financial position and our commitment to delivering value to shareholders. Along with our operational performance, these actions increased our book value per share, including the deferred gain, by 11%. to $51.31. We believe our focus on disciplined underwriting, prudent risk management, and strategic investments continue to position us strongly in the workers' compensation insurance market, which is evidenced by AMBEST's recent reaffirmation of our insurance company's financial strength rating of A. With that, Mike will now provide a deeper dive into our fourth quarter financial results And then I will return to provide my closing remarks.

Mike? Thank you, Kathy. Gross payments written were $156.8 million compared to $176.3 million for the prior year quarter, a decrease of 11%, due primarily to a decrease in new business writings and lower final audit premiums, partially offset by higher renewal business premiums. Our losses in the LEE were $134.4 million, versus $113.2 million a year ago, an increase of 18.7% due primarily to an increase in the accident year 2025 selected loss and LEE ratio and the absence of favorable developments in the fourth quarter of this year. Commission expense was $25.8 million for the quarter versus $24.4 million for the prior year, an increase of 5.7% driven by non-recurring adjustments. Underwriting expenses were $39.8 million for the quarter versus $44.2 million for the prior year, a decrease of 10%. The improvement in underwriting expenses for the fourth quarter was due primarily to continued expense management efforts, including reduced personnel costs and other variable costs, such as policyholder dividends and bad debt. Net investment income was $31.4 million for the quarter compared to $26.7 million for the prior year, an increase of 17.6%, due mostly to private equity investment return distributions and an overall higher book yield on our fixed income portfolio. As Kathy mentioned, we executed an investment rebalancing to address several strategic goals, including reducing our equity investment allocation to target levels and increasing our overall portfolio yield. Our equity investments, like most in the market, have appreciated very nicely and reached 16% of our investment portfolio versus a target allocation of approximately 10%. As part of the investment rebalancing, we also sold low-yielding fixed income securities to offset the associated equity gains and redeploy the proceeds into higher-yielding fixed income investments. The investment rebalancing accomplished several goals, including reducing our equity investments to target allocation, increasing our overall investment portfolio yield by a net 40 basis points, extracting an estimated net present value gain of $16 million, and reducing our required capital. The sale of fixed income investments produced an after-tax realized loss of $40 million, which reduced net income and adjusted book value per share during the quarter. Our stockholders' equity and book value per share were not impacted by the investment rebalancing. Our fixed maturity is maintaining modified duration of 4.4, with strong average credit quality of A+. Aided by our investment rebalancing, our weighted average book yield increased to 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 14.5 million for the quarter. compared to $28.7 million last year. During the fourth quarter, we repurchased almost 2.4 million shares of our common stock at an average price of $40.94 per share, or $97 million. The average repurchase price represented a 20% discount to our book value per share, including the deferred gain and adjusted book value per share. During the period from January 1st through February 18th, Of this year, the company repurchased a further 898,594 shares of its common stock at an average price of $44.28 per share. Our remaining share repurchase authorization is $53.1 million. As we have highlighted, we aim to be good stewards of our shareholders' capital. At current price levels, we are convinced that the employer's stock is meaningfully undervalued And executing share repurchases at these price levels produces a significant return on investment and generates significant value for our continuing shareholders. With that, I'll turn the call back to Kathy.