EIG - Earnings call transcript Q2 2019 | Employers Holdings, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Employers Holdings Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator instructions] As a reminder, today's conference may be recorded.

I'd now like to introduce your host for today's conference, Ms. Lori Brown, General Counsel. ahead. go please Ma'am,

Lori Brown

the be our Executive Good today earnings welcome call Chief call on webcast section With recorded Lou. second will is to Festa, Officer. Paquette, Mike our quarter are and replay of Investors the XXXX Officer; call. for Dirks, our and Operating call Steve Doug me from where morning, following available you, our Officer; a everyone, and the the being website, Chief Thank Financial Employers. Chief Today's

Statements this historical Reform reliance Litigation of during are statements. conference made provision not call Securities in based facts These Act that of on on made forward-looking Harbor Private are the XXXX. Safe are considered the statements

are be and results to call and remarks set the Although not the cause reflect actual Exchange different could materially forth the reasonable, with All will risks the time including we expectations in forward-looking believe the the developments. updated to uncertainties Securities be of Commission. and our expressed call at from expectations in filings risks subsequent are current during our statements made our

financial our the including Reconciliations Investors our these In metrics presentation the any release our non-GAAP our in investor or those to of Transfer press release, questions, XXXX use may that to and and responses in exclude in are earnings Loss our included the our impact we LPT. financial of materials remarks Portfolio earnings metrics, website. of press non-GAAP section or attachment supplement as an other available

turn to will over call the I Now Doug.

Doug Dirks

us on and thank morning, everyone, the Lori, joining and for you, good Thank call today. you,

in favorable developments. results reserve absent our quarter expectations, with were line Our very strong and second unplanned

return benefit our and as a of continuing digital and initiatives quarter, X.X% our customers. equity, development our will on IT agency and direct on the well while During capabilities implementation as plan of support accelerated force, delivered adjusted we execute that to annualized

our before ratio the LPT gain delivered than share During comprehensive XX.X% a more our the the value combined doubled by of grew the including impact quarter, we book and per of income X.X%. deferred net

stemming across an Our challenged loss reductions a XX% markets. top-line continues from nearly We declining rate costs the be to steady renewal for in all year-over-year, to period leading rate average decline ago. same a experienced principally by of declines compares average which decline year of XX% to rates,

to first loss our ratio loss cost year underlying expense ago. favorable, quarter increased continue adjustment and to year-to-date While trends voluntary XX.X% be XXXX on to and a the we XX.X% loss in which compares year business our XX.X%, accident

Our increase in underlying the period provision reflects concern regarding of trends. losses considerations reflects pricing not does deterioration for current market and loss

loss actual our down could is speak remarks. best or undertook his We of Steve for and which market an recently average only XXXX, concerns, the during six it on experience the ratio based current up increase to is months to general this will adjust estimate pricing of in of in California either change remainder Although expected year. rate the

currently We progress offer to least out states at able are the Cerity quarter. for third with slated platform. continue more Cerity make solid ten building direct-to-customer in the We in to five

to We customer behaviors. adjustments observed platform continue on based the to make

seek to marketing business platform. are as we Additionally, and testing strategies content the different we into drive more

will Although essential coming believe be in offering direct-to-customer a the early, that we years.

discussion turn for financial a call further our the to I'll of And over results. with that, Mike

Mike Paquette

Doug. you, Thank

a point lower before quarter of than a impact loss and year the a Our of of second LAE was percentage ago. the XX.X% LPT half ratio

the year XXXX LPT. periods and recognized relating by During million every the quarter, loss we including covered of favorable to nearly prior developments $XX year reserve prior, accident

ratio of year a that was ago. with of Our XX.X% second-quarter consistent commission expense highly

year a XX% increase. quarter was operating and this capabilities higher other ago. Expenses to accelerated implementation heavily Our of our and of and digital ratio expense new contributed percentage with technologies underwriting associated second than X.X development points

operating expense that consistent had was points expense and XX.X% the a underwriting ratio year-to-date ratio X.X with Our provided. of we year other XXXX previously which ago, guidance percentage higher is highly than

for the quarter $XX.X income from year X% up a investment Net was million, ago.

yield portfolio quarter will that Our was the the X.X% year pre-tax a for versus book to modest to investment ago, shift next. portfolio on reflecting a the I X.X% made speak

equity average our end, the investment X% of and X.X quality a minus an fixed and had quarter double credit duration total of portfolio. our At securities A of maturities represented

is in as reported in loans, variable Our lower speed year made as to we've affecting than mortgage-backed the securities. X.X duration assumptions today changes prepayment well investments bank rate a ago our due

During six pre-tax gains. XXXX, of investment we months the from of benefited unrealized million first $XXX.X

increased maturities which income our statement. value is $XX.X fixed our and balance reflected in million, our value $XX.X is on of portfolio by which Our in increased equities by reflected million, sheet on

including investment the unrealized were value share our year-to-date gains These increase the book gains. deferred of primary per XX.X% in our driver

our at million. $XX.X price share of average stock quarter, common authority we $XX.X per remaining stands the million purchase currently our an $XX.XX repurchase During repurchased share of and at

expect And next company used to be shell PartnerRe and close last Cerity be will renamed Cerity's will support we the Company post-closing. This least, to on week. but not Insurance writings transaction New York

the turn to over And now Steve. I will call

Steve Festa

for the Net new second occurred retention policy quarter-over-quarter. down despite rates over decrease from of quarter in Thank as $XX written XX.X% $XXX increase you, well policies morning. quarter comparable were improved business-bound the the This as period of XXXX. unit Mike, XXXX, of X.X% million and an or good million premiums in

current first unit the was XX.X% Specifically, unit from the of the where quarter rate retention from last for rates second to the retention this improved There XX.X% improvement also year quarter of was XX.X%. quarter. year for

year-over-year our in-force payroll increased a XX.X%. on addition, basis, exposure In

unit in-force new of result a the a on As year-over-year grown policy has X.X% count growth, as improved well business policy as retention, our basis.

degree, In average this policy to reflected size competition the quarter-over-quarter written rate book, in X.X%. in lesser over heightened in that for year middle-market are business premium decrease decreases an a in business. states premium in drivers net do is continued The decrease year the of on we and our

several The due decrease is the in of average of loss to decreases in improving reflection taken years the rate a size has that premium trends. policy California industry X.X%,

the that XXXX California fact, for XXXX indicated WCIRB down third in In XXXX. rate rate charged XX% in and charged since was the a the has average below average

addition, In rate the for year the first industry average charged low not this this in of XXXX. quarter been California has since

declining our that an as or We in inflection favorable We to continue and pricing near in to is frequency premium, business to results continued expected, frequency at With is severity. point. believe see raising. California exposure in rates, California

profit California that are believe resulted outpacing in reforms margins, high industry pricing improvements declines we market have The in but loss now trends. in underwriting historically

result, we a July our As California. pricing increase effective Xst have taken to action in

to were rather specific Our not universal actions territories needs maintain improve or profitability. by across our pricing California, of estimate of were current to but tailored levels

calls we areas have are multiple making the discussed the previous technology in we on investments organization. of that Finally,

released agency this quarter, a of including During partners. for new experience portal new these capabilities we some our in customer-facing customer the area

feedback has other to initiatives expected continue been early in we be favorable and very that launched The months. make will coming progress on

call back will now Doug. the turn I to And

Doug Dirks

the be and our with were a our summary, In consistent in property Steve. highly to Workers' casualty of generally and business you, continues compensation relatively expectations. results industry. favorable attractive line quarter second Thank

less always higher characterized persistency. less competition, business model sensitivity low heads has Our price small of that recognized and accounts by are

segment unchanged. through view this move As the of cycle, remains our we

mono-line continue changes us nimble, quickly closely market to changing monitor our As we you a continue and react insurer, conditions should the to to in to expect to advantage.

questions. operator, now And take with we'll that,

Operator

Hughes of first SunTrust. instructions] Mark from with comes question line Our the [Operator

Your line is now open.

Mark Hughes

inflection point Thank Yes. on Good ahead see morning. you. being of well? at as of Are you you the - think ahead trend the others trend Do California well pricing? an raising as

Steve Festa

I'll Mark, answer this question. is Steve. that

any competitors announced at that are doing our that were this not evidence we to just what be point doing. are We seeing going we

of we So, to question, trends. think the that we of specifically ahead industry noticing your are these rest in answer the

Mark Hughes

in you pricing And I seeing the that of it a trends change are a perhaps little inflection and in or think is have purely to part issue? frequency severity? California, Cerity do some is pointed maybe you,

Steve Festa

severity see. percentage is the The a payroll are of trends our expect California and that This in pricing frequency we action. frequency a book what we seeing are to and – on purely as

earlier, at an impact this the percentage have which loss mentioned results. a frequency I will as on being point, As pressured is of premium our

Mark Hughes

of down you the business? do X% account, kind this this to up – into and be think Maybe dynamic but to competitive you sign factors terms these then, of retain quarter, of it And in the lot feel when QX? your similar does not take is numbers, is going and a specific ability to QX like

Steve Festa

was we're July Obviously, X. effective place – this in

unit to it's fresh, see some pressure obviously, we But, in counts. expect Mark. California on So

higher obviously us, the Now attached a sticks with business to rate it. will that have

it little on impact premium. to positive that starting this be have month. We've a there So, of started see pressure. a will But will bit

Doug Dirks

rate jump I'll Again, this in Mark. And action into there, in are weeks California. we three

still of are particularly data. middle-market quite some market we that weeks those now greatest the business it's we impact So accumulating first observing the expected clear for that and the We've in competitive. three time is in been that. that, But segment is

the And we've XX% from on cited business to range lost a standpoint. we've XX% in the some pricing of past of that instances in where

yet, think the out So business. those maintain expect yes, the lose market the extent we necessary to on we to we've expect are that actions margins to it And recognized that on taken opportunities. that the we hasn't

our principal that is it the and in the the we focus gotten California where be longer point bottom-line, we top-line view. to sustained pricing consistently on But said no have think trends have not the our can

the business there. continues back a in favorable, So are it's stepping here. we account again, What seen to smaller we've today be bit early but

Mark Hughes

think, was coming a better variability? light On see Or you expected? little are natural could might the this it? little just expenses this a is quarter have Mike, or you maybe I the Is wonder sequentially. you if how expenses a just on I whether this comment than lower, a expenses,

Mike Paquette

not say expenses to case. the period-to-period, consistent just our that's are I'd from So like that but

based So projects they coming online. timing dependent this accruals that can the are in upon dependent, case, on They fluctuate. are of incentive

where that's a bit on thing a forward, are that can a probably think some the the better because basis I be is, look for lumpy. you projection of included we line year-to-date So, a and that best in to going are recommend take amounts at

Mark Hughes

off the on that front, I'd looks paid it management then like And debt. say you your capital

digital got still body Any your initiatives, on in those will the higher on with do days? but incurring be especially your a that making PartnerRe are in might capital language now money. good what sights the presumably and expenses you deal few done You you've

Mike Paquette

were regarding keep the debt, company notes. Well, and mind, those in were insurance the surplus at those just level

the believe won't free insurance it company. flow, are and whole company within because surplus, miss going of capital So level that we're we up because not overcapitalized cash we to is the a insurance that at trapped lot

out became The reason those very LIBOR-based compared were a brief to expensive ago. what why took and we just they that is period were they they

is equation. So, we’ve the $X transaction us load for that trading are acquisition The removed cash really million a cash. only and for from we PartnerRe

before, company is As writings going predominantly we're to support up said and use going that I that Cerity's once to forward platform in.

the And been the really that's than thoughts all along. case

I time those non-relevant. one before are don't will activities of think close we could really Those given affect forward. of either of notes length case the largely surplus particularly or in going transaction, So factored transactions, in the our PartnerRe were capital the the

Mark Hughes

the did Yes. I now presumably sheet, direct be rearview got you you'll you and buybacks? things as step mirror. might the that, is And clean capital be are a generating question. up those I balance guess, a guess thought share my in

Mike Paquette

have don't the expected price we've we is holding largely PartnerRe in some is it think company impact. for any company with Reason in of capital. capital the capital The time. been really line what will say, level insurance become keeping purchase terms why I at, versus

it I any view So, don't impact think in our will way.

be with to going that I will lumpy expect opportunistic repurchases, forward. respect But well. change are don't those one either share our view of think to actions those We as

Mark Hughes

much. very you Thank

Operator

the Our of next line question comes Matthew from Carletti JMP. with

is now open. line Your

Matthew Carletti

Thanks. Good morning.

what might you categorize mentioned a of Steve talk some loss – either you pricing basis. about kind payroll able the was get it to of underlying it frequency premium Just little probably doing. it basis kind you the on for of just on are out and a Doug. or color Steve, on costs of be a questions I a purer or take give to hoping view couple

Steve Festa

Yes.

year. premium, It's a mentioned percentage of but for as the year as whole in down frequency percentage the whole, severity of payroll in as or severity. a But as a actually the down is very percentage as as the So slightly is year-over-year, a very, company is of a is up California. excuse frequency, me, earlier, up I actually over payroll as California

Matthew Carletti

thinking, strong one have then little middle-market of the and heating market Okay. More larger think economy of Thanks. result claims competitors some and bit been see broadly there just some that space, I might at a other probably a a out has And a times in up one. they helpful. higher environment. suggested as full-employment That's

seeing business a guys kind anecdotally? that remove expect you or see of does anything you Are anything guys your book bit? of smaller from to you Do

Steve Festa

Yes. Matt, would say, our it's exposure have area. much that of that much don't type I business book in that as we hazard we smaller, so as smaller of, the not traditionally but is write, groups

this that Some of point. not are our point, least competitors happening seeing at at this do at and we

any of seeing a post-termination of that trends economy but goes a through today. the are the recession, those we story might be not So, claims, standpoint different if from

Matthew Carletti

on approval. it's the I know coming. and a Great. been Thanks PartnerRe time congrats long

Operator

the question from Research. with Kumar Our line of Buckingham Amit next comes

Your now line open. is

Amit Kumar

morning. Thanks and good

a few Just quick follow-ups.

is, question is leases remarks you timeframe came mention for your in first what did opening The there from?

Mike Paquette

Yes, Amit. XXXX I every and period. did, year, including LPT prior the accident in In almost

So really it coming periods. nearly all was from

Amit Kumar

there Or sort like, distributed? with – out which of buckets? it, stood So was those release any that in equally was AOI,

Mike Paquette

of The just of that. some absolutely biggest is the year year, and the wouldn't I is predominance biggest say it's preceding but it, the XXXX year

Amit Kumar

rate Got are you it. release look the I to discussion That trends, at that the makes Are getting guess you been obviously, have – strong. related thinking is, they reserve you very you if sense. now sustainable reserve how accurately the more I reflect reserves may run think or that? would this and historically the be getting are hence, trends of loss point probably where not level about to be should

Mike Paquette

We at every quarters, for Amit. see stand in Can't us this act, six answer what And during time. caused period in and but going that and a have we six see is seen that react that based each you, and going some what we favorable last for we look we where are the that of to on I to things predict way. was a can't quarter row. forward

Amit Kumar

what the that said. you you which compare anything, you change? haven't that, is saying last rephrasing would quarters, net-net, But you makes you anything seen are feel few Just if what

Mike Paquette

In versus And be turn each the experience only it's the year to six but see was emergence. what we the good just just based last saw in in XXXX between or pre-XXXX. virtually to well of we've I too is seen every we would past tell continued today bad, six accident difference it quarters, could early very say out on months post XXXX. what

Amit Kumar

the in I Well, and the talking question Can talk absolutely. the about more cost trends? perfect were trends ex country. That other makes was, we only just I pricing those about, sense. California. Also, of loss you presume, California, remainder guess, the

Just give us a little update.

Steve Festa

we we states, the California, in depending our what seeing lump are are states severity frequency are our In just states. of in am us pressure our at to exceptions least California not to decreases decreases Yes. as seeing, states the pricing seeing this and would that of There together. point, percentage that in going payroll. upon in I we state We're are in all cause But and individually. each pricing outside a other those seeing the reevaluate is, at

Amit Kumar

was which And nothing generally, medical inflation or... changed California, when about talk there we – was the

Steve Festa

very years went not reforms in a This all. still up back pricing environment we've in environmental California that is favorable a well. It's an No, at holding place is in fairly made. that a issue California decision really few the environment. still The are

Amit Kumar

future. all the for it. and luck That's Got for Thanks answers I the had. good

Operator

Our Scattergood. Farnam and question with Boenning from Bob comes next

is now line open. Your

Bob Farnam

Hey, there. Good morning.

of the sounds according with plan. it is expense XXXX going Mike, the initiatives, for question a like guess, I to So,

four Have your look? You expected to a XXXX ratio XXXX? thoughts expense increase maybe And about in there. had point you does any change how

Mike Paquette

Unfortunately, But seen to we four so what statement. a first if we've Bob, good the appear far. still agree I period. aggressively the as is into It shortest said are these as your with moving with accelerate possible points are we and does where place trying we at

in need come projection rather bit more. future of little years make know And we'll still second a for some these we until know line. spend terms half and not a I'd to expense when projects is in lot of There that an

early go So, it's unfortunately, think I just to there. too

Bob Farnam

bit. just want All gears Okay. switching right. to a And bit. I then, about Cerity a talk

So, how much at – according is point? this to how big this is plan? this And program how going

Doug Dirks

that I'll Yes. take one.

are are, we opening terms in my in in live remarks, I ten as states. of Just we where indicated

We five to quarter. expect more in current online come this

So, very from that making we're good progress. standpoint,

to anyway. ultimate of that closing actually PartnerRe intended write now With platform York, on New this the we'll we have business the

We authority filings. rate doing and certificates have of been aggressively seeking

I stood PartnerRe the us available presumption us. standpoint, that which would to has rate our sooner but had say, shortly So, at that behind we from up on this, will that would impact an have be

In grow on terms coming total continues of is business what of business the our but of book an today. immaterial expectations were, part it's slowly. the It to

most of customers the would And identify, our them really strategies. get we've how into I on to attempting our variety you side, where trying a been who marketing the where has really, – of of is are, learning has been say, occurring different which types are these portal. they been marketing and

the sustainable that's we we have a was search that in with and through is were paid successful is search approach bringing found we long-term started search. pricing for this in concluded current paid what terms paid in Originally, at least market that customers fact, not, that strategy. that But of

attempting drive of efficient we it a that into can in do and portal manner. so approaches, are we different variety more the business So more a

it It a not long-term. is I how And said play. comments, we to shape. to this for taking still my it long take think is going this be market This be in shape. long-term short-term It's as is essential play. to early, we is a this this think And remains market takes But there. is seen

is a think we earlier in to the lot process. learning doing advantage of the We there today doing are

as So react market the we're takes ready it. to to shape,

Bob Farnam

the route changes are in they you to of Or any in business, traditional versus In your Do that Any different different accounts are go the Cerity difference seeing Cerity the a book? traditional smaller see segments? would relative words, types Right. even you there accounts just your route? book? other

Steve Festa

was subset So, I'll a rolled not Cerity intentionally with appetite. underwriting by saying identical start out they because are appetites, underwriting

So is able in the being to expand data using the model by here of class part and write. that analytics this of strategy business we

said, is size being average are That we policy finding the workers' types policy to-date, is, quickly. these need are What buyers of a smaller considerably Cerity. compensation who in the

One proof have is, they report this a would going just describe they their they They to examples of need think job. a the kind business to however of to them, economy of insurance today. their of are want contractor, where I give gig as landed need it you consultants, and

that a we've in them and unique their think that's And we have so, to got platform to the hand policy minutes in allows marketplace. five a

that not completely maybe or shape, served market. underserved a an previously So we as think it's takes market

So we're looking to grow that out.

a But an certainly, strategy. is see envision observation this that's the be being through there been it's to to we able interesting don't market not system. ultimately distribution been agency-based entire that served traditional that But

Bob Farnam

that theoretically by taken business this by or been care would state funds? state of funds have Is written mostly

Doug Dirks

the hands most been this parts of anywhere. to you very not is can ever probably degree well, policy I has maybe mean a minutes something hasn't and efficiency of is industry, idea existed a somebody's able it do. five in do so requires – don't industry the I in possible. That's the it small put that to that

think opportunity is we So there. again, great there

product customers, shape ability Just online, making to this question the taking a buy these finding aware the then in of them marketplace. and of

Bob Farnam

the have accounts, expect – And in you do something characteristics, differences different the of something to seen? loss traditionally you expect like is do you not type and have that that

Doug Dirks

least What this the loss particularly into the is classes it's though we are the expectation and in if insight to same same. the of classes is, at better We ultimately. a filing, business went our is even some performance seeing of actually an data small these writing into that a we're there rate different as accounts, probably with of result

scale is time, a the can that. But loss to one that's take that's dependent enough even it and because large until on you of that be could platform the out disrupt volatility, having that scale completely going some some of going to

it's opportunity there. better same take a term it's though So, of there's category classification. the even it's some industry in going to loss a we that book longer generates because But time actually this think business different result,

Bob Farnam

right. All

it all me. That background. Thanks. for was detail there. Thanks good the for That's Okay.

Operator

instructions] Our line the question [Operator from of Mark with next comes Hughes SunTrust.

now is line Your open.

Mark Hughes

premium curious the Thank you. in of impact I on quarter. the audit was just

Steve Festa

and year-over-year earlier Audit well. call, And is on very our still increased strong the I result – showed premium pickup exposure the basis, payroll those mentioned on our XX.X%. quarter as as we've a

consistently we pickup see So at strong audit. final

Mark Hughes

Thank you.

Operator

questions further this at closing for no remarks. showing in time. I'm the call queue And I'd Dirks Mr. turn to back to like

Doug Dirks

Again, Thank participation lot you. on We you, your Very a and quarter. very a appreciate joining today. good. now. right questions. going got Thank for We've us everyone strong your

We the and we a pleased are think we space marketplace. the progress are carving are with very we in out unique making

So you all again latter we of you Thank October. talking much. look to continue We part in very forward. forward the will moving to

Operator

your Everyone, a now the great day. and program thank gentlemen, in disconnect. participation for and This you Ladies you today’s concludes conference. have may

Employers (EIG) 28 Jul 192019 Q2 Earnings call transcript