EIG - Earnings call transcript Q2 2022 | Employers Holdings, Inc.

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Operator

Good day and thank you for standing by. Welcome to today's Second Quarter 2022 Employers Holdings, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. advised call be being Please Instructions] that is today's recorded. [Operator the now to like would conference to I Ms. hand over today, your speaker Brown, Lori Counsel. General ahead. go Please

Lori Brown

Thank Mike Kathy website Paquette, being during call. reliance and the These Chief of recorded Financial that our not the webcast everyone of made Officer; following Chief from call you, made the section and Presenting historical on statements. Antonello, replay our and Officer. Statements Employers. Harbor Act quarter provision call XXXX. considered of will Investors the this are our in Executive Safe available for statements is are XXXX forward-looking on call earnings a will Carmen. Private conference to the Reform call Today's the facts Securities morning where be based Good today on are second welcome be Litigation

under SEC and are public Regulation our website release of earnings in company's in and subsequent time the only portion In webcast. different the monitor the addition conference of not SEC's disclosures non-public website actual statements the responses our information Although, calls company's company's uses forward-looking remarks remarks are press the Securities of material website. filings, in and our releases, to filings Accordingly, believe expectations, be that of with reflect our the in call included to from press following to risks metrics. with disclosing current updated and reasonable, other obligations release, our set be our FD. as in results these complying and or Commission. investor the should section materials financial to an the the the the including Investors developments. presentation, our Investors GAAP expectations call are forth disclosure our results we also supplement our at of metrics we company any means The made website. financial will our to its earnings All included a for will Exchange and Reconciliations non-GAAP press risks Such in in cause section non-GAAP could be on expressed to use and uncertainties during as may investors questions, attachment available materially

Now, turn I call Kathy. the to will over

Katherine Antonello

for Thank you, to financial outline Lori current our I quarter today. our today's the of for market. second and discuss and the thanks call, us everyone Mike workers' On joining XXXX compensation results and observations of will

executing and new experienced with are quarters, business new in increased from have premium and audit business our Cerity our Employers business strong renewal security We within This writings segment, significantly growth segment, strong prior extremely the Consistent on well resulted our further momentum plan. recognition. and recent within we written our earned writings premiums year-over-year.

during premiums a those As versus and quarter respectively the XX% up first our gross of ago. result, half and are written XX% year

policies our with supported a collaboration growth an again and continues an artisan number enforced new our initiatives expansion appetite increase in additional Our by recent support QuickBooks. quarter growth. end four once develop represents of million, strategic segment $X.X premium such which untapped opportunities quarter the several Intuit's driver into was was by solid at this over force. ended landscaping, Cerity to residential, last its to classes will and contracting of was janitorial, Cerity's which XXX% the attracting as market. quarters a with markets record target of We

adjust that to and industry the quarter for to and relative well have has workers, count first will Our growth consistent especially hospitality, loss premium XX.X% audit and average year wages Since growth as has compensation consistent With on changes wages, prior increase weekly our focus current of the business of LAE base of XX% ratio in up and payroll recognition. the We we with wages, positioned XXXX. year to continue accident voluntary rise. largely at business premium maintained wage as in linked benefits to workers' the wage seen and the recorded XX%, line state as pandemic, robust indemnity XXXX, led to generate nicely sharpest and policy leisure automatically throughout in lower exposure inflation. our the the

business. next routine prior end. We'll reserve our study reserve study development full year of at our favorable midyear complete performed million full net also from loss $XX our and reserve recognized year We voluntary

increase taxes, a general and debt, than be vary underwriting and expenses $X of premium. premium ago. each attributed provision administrative The can to earned and bad which a $XX with year assessments, of million higher Our our million were for

quarter, within XX.X% of focus control is reduction higher of our This and of quarters with result topline. $X this Our of XXX The to lowest consolidated general a our fixed and earned down premium underwriting do basis a points. are administrative in underwriting premiums to consolidated year those expense the productivity from our earned as ratio not vary and efficiency ago. impact is million lower expenses our G&A and tend and ratio year-over-year that expenses, fixed led combined grow direct and a a on XX expense and we were

technology and to further expenses, position remarks. Mike that will results that, the are workforce and will us to our manage financial investments provide both provide of diligently scale to then continue closing discussion customer digital I With my business. also Mike? improve to return our we and we our now and experience While committed a

Michael Paquette

That primarily versus Gross $XXX final $XXX premiums a million premiums. and were million Net an premiums Kathy. renewal higher higher of of to $XXX increase million ago, was written were year and you, new premiums audit million ago, earned year $XXX versus due a XX%. increase XX%. Thank an increase

The favorable $XX million The just versus by million ago. were during million year to earned higher was expenses development in versus Commission million was due and higher primarily quarter offset agency accident Our reserve losses a partially the loss due premiums loss to development. development of incentives. We expenses favorable $XX year recognized favorable increase ago. prior increase of adjustment $XX and $X higher increase earned were ago. million versus million $XX a a premiums, an year net $XX year

Our reduction segment of during current is Underwriting Xst. general a of year expenses within certain XXXX went result decrease of million administrative in $XX a Employer expected $XX as on to a second versus ago. the ratio July renewal commission our XX% effect half million commissions into that and were

higher a Kathy in reporting ratios debt versus million income segment year results As combined an namely calendar its had from variable taxes, of premium XX%, Employer From ago, our $XX and XX% bad assessments, and are underwriting a increase provisions. segment were the expenses, and mentioned, resulted year $X respectively. million perspective,

underwriting had loss quarters. a Cerity $X very of segment underwriting year with past about consistent over Our an enthusiastic quarter the We Cerity's the remain increased writings, several for of loss premium which significantly million ago. have its

was amount collateralized advances of subsidiaries securities. high-quality Loan And strategy. the proceeds Pursuant a to these, ago investment Loan bond investment balance, income XXth. equivalent $XX were a net have invested higher increase our resulting $XX these to used ago. through our Federal due million year Bank to loan from is yields an Turning million higher a leveraged Bank $XXX investments, received our sizable Home asset from million obligation of the purchase this and June to Home year was of The Federal advances strategy, insurance

fixed and our average A represent other our Plus. quality maturities equity currently portfolio. and total of Our an XX% X.X securities duration credit investments a of of have investment And

weighted end. quarter Our yield was book ending average X.X% at

on after-tax by of unfavorably this quarter and value by was which net million other of at of the $XX.XX net losses quarter quarter unrealized our income our we securities, are our and securities per on book equity million our fixed at our average And average impacted balance further are repurchased price common and this since $XX.XX million stock of impacted after-tax million finally, maturity share Our of reflected a stockholders' unrealized sheet. and per price which from $XX unfavorably $XX an $XX share end. statement each have from our quarter, our income losses stock were of equity repurchase an we reflected $X during common investments,

with to share remaining $XX that, authority turn at call Our million. Kathy. And back I'll repurchase stands the

Katherine Antonello

left reemphasizing and Mike you off. you, Thank where

reiterate have that the of that $XX quarter, the throughout market $XX sharp to dividends. mentioned increases our to the benefited also I which ago. million interest increased total, want just XXXX repurchases income rates occurring versus returned of year million in During of our Mike six the a of investment comprised months share X% year-to-date capital net shareholders million we first and and in additional $XX

investments, other same losses statement. flow result interest on book While unrealized X%, by from fixed only value our per dropped direct share losses portfolio, adjusted unrealized investment our through of maturity equities market our generated and a those our income rates which

and capital our growth are sheet highly supportive strong balance remained Our underwriting and success. of continued very and

small we remain confident take compensation, we business are and As to to will that a in workers' we specialist well-positioned and favorable continued that, initiatives, operator, now seeing our the And trends, highly we're opportunities with success. questions. in react

Operator

question [Operator Hughes Mark from you. Thank first Instructions] comes Truist. Our with

Please is go line Your open. ahead.

Mark Hughes

Yes, thank morning. you very much. Good

Katherine Antonello

Mark. morning, Good

Mark Hughes

going kind competitive California, the -- could not that in terms I how -- of of think premium in the it's is Rating going talk on in Kathy and in it market an dynamic clear much has just pure pricing, -- the pricing increase what's you follow just state? but Bureau about rate, the suggested the to

Katherine Antonello

Sure.

and about the So, quotes, since The at a binds a It's in appetite of led over our increased our the book. in and a strategy XXXX and of changed little quarter point in of of X.X% announcement, second sort year improved -- But relative our average Commissioner we quarter business that's pure XX% industry the a filed that remains rates economy adopted new has filed submissions, rate. in WCIRB of adjusted saw in the lower the about to advisory to currently premium for we of there. California California, noted XX% the California think To and expansion rates combination it premium XX% California X.X%. total been around pricing about our Commissioner's and than rates, Laura was advisory increase your that, no said what the in they I higher about rates. benchmark Having XXXX. about recently are second the change increase

we've to respond need flexibility in the in they're regard recent process they we taking is will analyzing WCIRB. reflect that deciding So in the And own the filing that being the how point the have what I still we're our decreasing seen the soft a in And so California. high risk market companies of and much would to in than whatever risk, seeing say, that -- data Overall, there of from are rates seeing just still there. comp, Not level past. and remains country-wide California. It's a we're the too that's competitive. the change yes market, slower a at pace but

Mark Hughes

you. Okay, seeing increase kind thank what renewals, first mentioned were And in aggregates payroll your in Is are talking then I leisure. kind for wage or you're what book, in you wages number -- can broad there gains? you a and think gains XX% share on of the you of, quarter, the

Katherine Antonello

Yes, and seen by renewal increases. the than we've that -- ago, seeing there. renewal payroll rates offset loss book, is though decreases our on more slight minute -- are and being so I said, even of wage very decreasing, we're like a attributed most costs to that's And

in year-over-year. increases overall seeing we're renewal book So, our

Mark Hughes

Okay.

like that fair? loss, is So, that wages, mostly it's offsetting sounds declining

Katherine Antonello

and Yes. just increases employment Both hiring wages and levels. and

Mark Hughes

then-- Yes. And

Katherine Antonello

than the offsetting we're than more decreases offsetting are -- in I'm seeing the sorry, are rates. more that

Mark Hughes

fair Would the to be think underestimated policyholders Okay. a those premium payrolls this had then that dealing underestimated that'll think? continue -- it if with tailwind you year? trend, their do auditing we're -- to their continue from last is And audit are

Katherine Antonello

tailwind quarters. me surprise wouldn't It a be continues for to if it several

Our this things we a quarter, increase -- were of audit on. the couple that premium there saw going

did we we $XX.X $XX.X at accrual, increase end million. was of it quarter, audit it the second increased and QX our the to For million

July. amazing And So, we're see this turnaround It's totaled tell million. into been pickups that space. that that quarter, were you, flowed through. And I audit also to an about strong can $X.X continuing really then in trend

picked six returned million in we up first XXXX, contrast, for the of million. $X months first audit $XX we've the six about premium For of XXXX, months and about of

really to what that's going our some back all these on especially that's increases before, industries, was in a employment, So, had of numbers. wage the to saying impact target strong positive I

Mark Hughes

commentary any Then inflation a the there? for costs, question final medical me in

Katherine Antonello

over the We're the not We other has containment forward, book to think inflation a lot job done lot our -- business medical seeing up medical any potential tame, to if relative mitigate impact tick that in sort I and starts the impact to comp nice containment start last those of the implementing been medical going -- inflation will a has market, sector inflation. on inflation. sectors. -- And measures medical measures to relatively of decade of of do of for cost medical that a the even of of

course, feel medical solid Of of in the place. like on side the both I hedge is best claim these along against with reserving inflation philosophy, and settlement have practices, prudent we just

not So, short yes, medical seeing certainly it doesn't won't inflation, is answer through, lacking but impact mean we're an come it of right now. it's

Mark Hughes

much. very Thank you

Operator

Instructions] question Paul ahead. from Piper Newsome Thank have Sandler. a [Operator Please you. We with go

Paul Newsome

you it than think costs Hartford it over the quick lower medical the they inflation. cost inflation well? thinking peg consistent Or about how of that do you this are a on what follow-up or talking Is X% Just was long-term. as medical higher morning with about?

Katherine Antonello

can talk our medical about we a the just potential how bit in I little inflation are what me let reflecting -- reserve. Well, for

the we've in of our inflation in the reserves inflation reserves. provision provision our included reserve earlier, primarily that triangles. a buried So, recognizes an current possibility And always our impact in and increase I your for that's can medical implicit inflation, as said

we So, implicit scenarios over reserves. several of we that's going go, for increase in than our our at and pick then defined that reflected and where rather one booked point inflation inflation number think is look years of in a to sort

too you're some say So, the different of is And have reflected. that's would that that scenarios tried that we we from it. number not to stating how reflect I the

Paul Newsome

Right. Thank helpful. That's you. very

Katherine Antonello

you. Thank

Operator

we And follow-up go have Please you. Mark with Truist. a Thank for Hughes ahead.

Mark Hughes

Yes, to around that million was to going down to the fixed extent year-over-year. there $X any alternatively, Mike, the those Or just I ask expenses-- plan the down Is bring expenses of you may anticipate? or much see topline should sensitive of those How you expenses? might trying they growth? in sense to what be more increase to a maintain you How inflation just an further? get

Michael Paquette

Mark. thing, Sure,

one Kathy to as I try are we is dedicated us The control that. trying expenses save that which very in flat to regard right build that's thing salaries So, something try that to and our now pretty to and and offset fixed wages, possible. in for to hold expenses difficult elsewhere to as there

are are expense the not side, dividends, of assessments, variable largely control. On do, outside taxes there's that, much our can we those premium

been able bit, a reduced to we're that been a going best not and to slightly that's So, growing hold, to we've as despite expenses. a hold our the And if challenge to fact we going premium of fixed quite can. we've try that going be forward as little bit

Mark Hughes

implemented you taken, of steps Understood. appetite, And better at lapped adjustment. in much against at more time Is and not to increased continue were some things mentioned impact about at and therefore, lot that which of challenging? comp becomes of a you some think the these and impact understand specific that those price the a you've a you it's factors California there tailwind? the the just so anticipate you I'm as those growth whether would when things a you Or trying of to business? of point point economy,

Katherine Antonello

add maybe little growth. color of Mark, I where So, bit we're seeing around our can a larger of some

on binds talked quotes in uses One of we years. last digital take distribution the that's really our submissions, haven't about over and of to small and the areas that off our APIs taken yet area that couple is business

have over a year-over-year and API XX business increase integrations have new policies. in We digital they produced

and XX% Just premium business we've and of $XX on about million increased year-to-date, And that renewal increased for XX%. new about digital for this space. in quarter, about policies written it

XX% year-over-year. up that's So,

appetite first coming talked expansion from in we've the And appetite the is $XX that expansion we've classes. some that, the our written Now, about in expansion year, business about. of million alone new yes, of

to So, we're increase look just opportunity. our continue to to new at ways market going

bullish continue So, it's time. that like we period or extent in a we're pretty of said can the with or for I digital through whether topline to expansion increase Cerity, appetite to some partnerships

Mark Hughes

Very good. Thanks.

Operator

Kathy in her turn for I'm thoughts. not back will showing the Antonello to And final further you. Thank call I the any questions queue.

Katherine Antonello

you, forward again And Carmen with Okay, for us to meeting in this morning. all you thank thank look and we you October. joining

Operator

And concludes Thank disconnect. today's this may participating call. you now and conference Thank for you. you

Employers (EIG) 29 Jul 222022 Q2 Earnings call transcript