Earnings call transcript Q4 2022

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Operator

Thank you for standing by and welcome to the Employers Holdings Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Lori Brown, Executive Vice President, General Counsel. Please go ahead.

Lori Brown

Thank you, Jonathan. everyone, fourth welcome, call XXXX and Employers. for morning to quarter the earnings Good being webcast be recorded section is call Today's and website, call. a the of from where replay following will available our Investors the

reliance Presenting are today Kathy Chief during the Financial Private Officer; are on Executive on this Chief forward-looking will made conference Mike These our are Statements considered Antonello, historical Act provision not Paquette, based our harbor and Officer. of the Litigation on Securities call in of be made statements call statements. XXXX. safe that facts the Reform

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

company obligations should the of a other addition information to in questions, to results calls release, Investors with financial company's included of section uses metrics the use public our complying available of Accordingly, our In FD. website. press following non-GAAP for earnings to are an and our may and or release and we disclosing portion investor company's earnings as website. material, disclosure presentation attachment conference in nonpublic our in The Investors website responses financial SEC's SEC in supplement disclosures the included means webcast. will GAAP any filings, its section our of press Such monitor metrics. be materials and non-GAAP our on in Regulation the to these our Reconciliations that releases, company's investors under as the also website press remarks

Now, call I over the Kathy. will turn to

Katherine Antonello

results. the start Prior Mike for full thank Q&A, Lori. quarter I'll To into insights growth us the am and income. talk insights for compensation of our we increases pleased driven it And about some achieved with I'll to fourth sharp our then financials. joining everyone over on today. XXXX. discussion, hand Good little morning a XXXX I'll current our premium the for net market -- to and workers' focus investment then you, by some and financial with you really details closed year We and writings provide in Thank into revenue share more strong year our I in both what the to XXXX.

quarter were written up the for Our XX% the premiums year. and XX% for

we our the of where within strong classes, increased and The states renewal and across final the growth most submissions, the new binds premium primary expansion of was audit and the low-to-medium premiums, of driver hazard thoughtful new and result group higher quotes was business disciplined operate growth.

our our accruals premium labor increased pickup strong audit grew and and recognized also final We strong the payroll premium exposure market wages. with rising audit as

in the rates traded benefited XXXX, highest the $XXX net XXXX and higher history We wrote of premium our company. Finally, premium continued any publicly renewal million a since retention written our throughout from year as than other solid in year. third

publicly net traded invested up and sharp income investment any than XXXX, impacting $XX net XX% the XXXX income investment and balances of the since bond market company. due The in was rates other to for XX% our yields interest for Our was quarter history year. higher higher securities. as increase higher in primarily We million a fixed second year highest of maturity the earned and

on loss throughout voluntary LAE XX.X% XX% XXXX. maintained current ratio a losses, and year respect recorded Employers versus to each With of and business Cerity accident the

million loss in year During recognized to $XX net each reserve which Cerity the quarter, Employers prior aggregate. favorable and amounted the development

other management from this expense for far to XXXX. partnership additional the XXXX, opportunities and than lower $X.X helped which purchasing launched experience year to to any in which ratio administrative since million. year was workers' to consolidated lower XX.X% million our premium a fixed $X.X and Diligent small online its year general expense Cerity underwriting Cerity customers continues year by ago increased compensation. when to writings business an XXX% develop attract seeking we

continued our our The XXXX. thank an provide policyholders to workers agents, and drive want outstanding I for their our service you our Finally, dedicated success. unwavering injured employees

provide With a our provide then return that, Mike? I'll further closing discussion now financial to results of Mike my will and remarks.

Michael Paquette

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

reserve loss development. were due million was our increase year and losses adjustment Our million loss to year versus expenses prior earned $XX The $XX ago. premium and favorable a lower higher

rates. a $XX XXXX are accruals agency during subject $XX earned prior million Commission were current quarter, writings primarily related an incentive business development The loss was XXXX million year higher $XX ago. year years versus and $XX recognized the versus ago. generally increase accident increase prior favorable million year in and of which premiums, million higher due reserve We higher to to expenses a predominantly new to commission

of was earned $XX $XX and general each ago. expenses Underwriting premium. versus with and higher expense, assessments our million debt The increase million administrative due to year which taxes, primarily vary a bad were and premium

those tax in tax-advantaged Income $XX associated income with gain year effective LPT and exclusions periods tax our each rate. million, amortization. or effective and $X ago a XX% investment a million effective deferred a XX% benefits expense rate was included of versus The rates

ratios calendar XX% perspective, year benefit quarter repeal loss the versus million XXX. benefited from underwriting its of combined preprivatization Section and were a million XX%, of and our nonrecurring effective reserve had the year income respectively. prior segment underwriting reporting Code segment ago income Employers current $XX $XX and favorable year The further resulting IRC in of From to rate tax a development a attributable

had ago. Our underwriting of Cerity its of the for loss quarter, $X with million consistent an a underwriting loss segment year

significantly enthusiastic several quarters. very writings premium increased Cerity's which past have As we about the Kathy remain over mentioned,

Turning to investments.

for yields year to net Our ago, a income more XX%. leveraged Home was was largely due Federal and investment of bond amortized than resulting higher $XX million higher invested an increase versus measured the quarter increase balances cost, from $XX investment our Bank Loan The by million strategy. asset as

from insurance strategy, high-quality, securities. obligation amount the advances collateralized this to advances were $XXX of and our Home a used Pursuant proceeds Federal of from similar million the purchase loan received Bank Loan to have subsidiaries those

average of of A. X.X an credit quality Our fixed maturities currently have a duration and

yield is which ago from is sharply book X% ending average X.X% money was X%. the and weighted new year-end at near today Our our rate up year a

quarter income our impacted book gains equity unrealized on net $XX by fixed this income on statement. share securities from Our net stockholders' benefited and other from securities reflected maturity favorably $XX of and value net after-tax which And reflected are gains are million equity our investments. sheet. by after-tax was further our unrealized per of Those million balance

during stock average a per of $XX.XX finally, year-end, of million share. quarter, price further of And have at an common stock share. at of $X.X our And bought $X.X per our since $XX.XX million average we the an repurchased price we

repurchase $XX.X currently stands share Our remaining at million. authority

And now call to turn the I'll back Kathy.

Katherine Antonello

capital dividends. strategy return of management expanded XXXX Thanks, our Mike. the to to proactive in include excess via We capital shareholders special our

returned million our share we regular capital of repurchases, dividends to million During $XXX million XXXX, $XX dividends. $XX of over and [ph] comprised $XX special of shareholders, million of quarterly of

that positioned both business specialist and compensation, small a the well seeing. we're to react further are and workers' As opportunities and trends we capitalized to unique well favorable

While had are Tailwinds especially the medical workers' other a hiring the strong presence, where pricing competitive, benefiting has moderate from comp workers' leisure line and always also remains hospitality in remains categories. and industry, inflation remained we've compensation relative and profitable. to increasing wages,

new highly continuing and both We to focus compensation workforce our our Throughout will the line segments fixed to customer We're in our will improvements success. structure. profitable yield workers' delight on growing investing remain grow and XXXX, experience and market our in be maintaining base. confident our customer of which our while continued identify efficiencies top expense to

with And operator, will we take that, questions. now

Operator

the Mark [Operator Instructions] line Truist. from first question Our comes from of Hughes

Mark Hughes

stands good do there Is with capital that still capital. got what to front But is still situation capital that? today, it pretty in you got you? opportunities your something top opportunity your with line Kathy, you've to return of seem leverage presumably, moderate. see your do be as for the How you've

Katherine Antonello

our in say and Mike we've that interest which capital that, Yes, the more in way managing going and in And I will is company just every be you committed very use so. its we're always I that. XXXX. do shareholders. yes, details. do strong what But do to will is will of we to been the best and continue believe and going feel I'd the I to tool of I technology that's our forward it's more to on supportive let a discuss toolbox Mike changing. the do our mentioned feel that see company a capital some but And more earlier do position. We we not growth like And initiatives the potential I highly that have we did in in of details let give

Michael Paquette

still of million to were the the -- to we the distribution where helps function great at growth $XXX about reducing leaves serve a premium saw So today. insurance parent our dividends reasons And a of was one dividend million our million that's good about stand of the did of both surplus And companies. able in that we underwriting of a of year. question, affect extract to to XXXX and $XXX place. that it why this because special capital the is increase we is from today to ratio That But XX% us XX% this Mark. the larger in premium result we our year end $XX special at one special which from helpful very

now, number higher I like it's mid-XXs. both to right perhaps the XX% to than think would I the Kathy at see to that even low and

With half or that company dividends, able special until making our on further whether but we'll that's stands, what not. efficiency determination it we we're in position for where and you when to on our based way We'll determination make like special time make are that guarantees of appropriate. year second important this towards insurance determination that in what won't that So at they're for make There's to we understand no a but our be as look to at dividends comfortable company the respect capital to that the XXXX holding appropriate regard. more capital like. is looks opportunities for our in XXXX the

Mark Hughes

look you'll those is -- this there there? that build written had some anything particular in new fourth Is component run rate details. a appreciate good that it? on I is a Cerity seasonal quarter to Is premiums, for really Yes. to on? going

Katherine Antonello

do think I to will Yes. continue strong at clip. a grow that Cerity

For to We're the year-over-year we've on the Cerity some of not we the The too and XXX% been future. and that some increased and with XXX% more that direct-to-consumer and I'd always and expect size, obviously to We're that are like expansion XXX%. Cerity helped of XXXX back-end the to fully also fast. want have partnerships enhancing focused why partnerships cautious been we that future. in appetite see area. don't fourth in cautious and of a between their announced in space quarter, has pretty the growth also in premium its by very adding profitability growth that's capabilities and about grow somewhere continued

Mark Hughes

talked push broader hazard say? you? is your cetera. you go hazard, much you more that along about How And to How in there driving expand, et classes would low-to-mid process I think are submissions, to then median far

Katherine Antonello

done can. million expansion an expansion. class has a expanded so anytime opportunities ongoing -- look down to you future tell we're is profitable be opportunity into and can plenty there, And little I those XX -- There's to in haven't that of process. now, continuing premium months that know onset about to that written which soon. don't continue We'll find I where we been from there's codes. Well, our for we there. appetite the $XX where of is we've shut it's we over of growth What continuing growth the we function group that see will

Mark Hughes

Current XXXX? more. to Yes. Any If reason for couple lower higher or that year I a in outlook? could just slip in be accident

Katherine Antonello

and the see year. looking would material trying didn't we I we don't We're XXXX days current that a in be. in cause XX project accident when what but anything might alarm were that change to at expect

the I very accident seen what it So will think similar be to you've prior in X years.

Mark Hughes

for potential about finally, any Kathy, then you And wonder, the I have reserve broad whether development. comments

-- the that years magnitude productive -- just based on been that you front? much to the has dipped of of run have think reserve, is know XXXX or -- XXXX I looking What great some into Just you? anticipate some been accident on how but these you've I the high-level don't this more for got in forward? that -- how that go as a we about maybe obviously thoughts it could one

Katherine Antonello

Yes.

So studies ago, a a as to year you know, year. decided full we about twice reserves of do

And over that increase The one included inflation. current always has booked into been our in the area reserves at we've recognized is a so our an in of inflation have triangles. -- reserves And spent will of where is regard buried to But inflation. reserve that continue looking XXXX. time for always our our lot a provision in the reserves possibility

increased booking where deep at implicit inflation. reflect we a to several the and our above and scenarios do did we So looked over something dive

we're that I'm There's that concerning good I reserves. so feel And is nothing like our spot. in seeing about a

of that reserve we know, prior recognized you As predominantly $XX accident XXXX came favorable and from years million year development prior.

philosophy there until compelling the reserve have there's that to need moment, that. felt a to a the was And more years accident to those. do we hold reason adjust at Our current tends not on

Operator

[Operator Paul question line Instructions] comes of Our next from from the Newsome AOL.com.

Paul Newsome

Piper general. things on Sandler. a didn't like year. Any environment about some to from detail I'd competitive signs in have anything shifting hear the about It's I -- more are perspective. the just Congrats from competitive that

Katherine Antonello

Not in a way. significant

to pulling opening to felt where profitability. was before. sizes in environment that competitive. continue their pricing I I've insurtechs tightening us are participate the could There somewhat we out up heard been chatter and sectors as or writing, would That the areas have business the kind like of achieve are inadequate characterize that For some opportunities to pricing about be where pockets either some for premium the we

the a for we decrease For many but many, in in rate on. flat. seen I did in our renewal could not average of, years. we've that nutshell, adjust be would almost can I -- changes fundamental It's smallest it's some But going market tell hard still XXXX when pricing changes approaching that there show QX book, you we exposure, our say kind a year-over-year

Paul Newsome

maybe little be the margin? frequency that? us helping something might on think out of Is the less what just So drivers else there Or it a benefit? is simply that bit you is

Katherine Antonello

sort look compare talk to with year going year really accident about I comparing a second. any If that frequency to accident on year our frequency, year XXXX the XXXX our don't remove current think based this the accident level. it's well on year anything at frequency. that currently premium, we're to accident which emerging is interim for from below far I we When we can accident so I'm on-level it's and referring distortions XXXX of still XXXX. pandemic,

So pretty significant through. still decreases coming in frequency

kind But I going severity accident of we're seeing too we'll to where I'm think know to any causing it's tiny thus Nothing medical eye in would think is concerning that to I right seeing but severity XXXX On problem uptick still an for side, a I the early, really don't say, have on inflation land. that. far. year keep that's now.

Operator

Instructions] our Mark from is question And Truist. a [Operator from next of the follow-up line Hughes

Mark Hughes

on wanted Would to just the the basis, clarify necessarily so relative on down. premium? not said say a frequency I is Kathy, premium you you to but when closure

Katherine Antonello

any our frequency And continuing the go the We level, And frequency book. that relative truly the to to just on-level think ahead. in you're like that's to pure significant puts premium don't -- all see at comp in which frequency I we Yes. on same years are look decreases of decline. pretty so premium measuring

Mark Hughes

-- terms No, was you off. I going it of that's to I exposures But sorry, cut I'm thinking [indiscernible] say in of with

Katherine Antonello

on seeing the on line, a on-level basis yes, it or you across not a we're exposure basis. on on-level whether decrease at look an premium premium basis, an

So yes, decreasing. versus it's payroll or premium,

Mark Hughes

the market? if trend costs. NCCI seeing, there the putting the Yes. particular state look they're at you out in a what latest you're on like data Is What's loss in

Katherine Antonello

the costs for states. I pure the surprised I decreases no of in Loss them. filed fall of X.X% for say the approved loss but decline last the most guess change. And premium are costs just California, are a to of trend feel what In represent adequacy yes, commissioner little WCIRB down NCCI appropriate but the of continuing is actuaries are is increase carriers rate a we drifting carrier sizable best-in-class to every a for these being at both be I'm that kind seeing what some California, can that lot filed it's make good that and have would in of pressure flexibility. that's most and and the and still is that filings our But overall Cerity. are they're tends Employers team always part. some seeing analysis appropriate we have states our I WCIRB in complete own upward feel the of like I'm for and NCCI faith file

Mark Hughes

When Federal you've Home been to months? strategy seemingly has used X What's next very potential does the successful. taper? of Bank over that the in impact XX the movement that Loan Mike,

Michael Paquette

that that trade July Home those Federal arbitrage at LIBOR And maybe done Loan today of with And today. going will X are helping for and end CLOs when year. us the the between is quarter probably the this is X Bank change So borrowings it's SOFR. goes rates LIBOR in the away that to track fourth the reason that third, the that's difference

is So $X also activities we interest. had But other CLOs. with as To on the just $X.X to a put result was impact net year investment it going our XXXX, the race that way respect that again, the million increase a about goes. into worth of trade going the in perspective million additional that's as and of yield to

to pretax had but the XXXX to to is that be and in $X.X to a continue benefit benefit us as year into will wait million what So from that that effect it But to have some see XXXX. dwindling we'll we'll have be goes by. going trade

Mark Hughes

expense modest And were Okay. up strong. growth the would a That's pretty been little think. then I on -- anything but a commissions pretty your number, bit ratio has

all sense. that about Expense any XXXX. ratio though, thoughts overall, So makes

Michael Paquette

quarter mind took. that a that's up expense in net had with and the fourth investment the of that is keep because little development and income largely So ratio the success we bit we

had we and year. that So the that compensation to accruals adjust some adjustment entire meant to related that

little fourth on an saw. additional the we bit is anomaly revenue So quarter of that based a

Going and to hold we everything into next expenses. fixed line year, Kathy doing can our are I on that the

since to will accomplish the quarter to continued growth you that avoided. As be with catching are splash in first the XXXX as to to expenses. expenses earned variable premium largely up know, the control to vary the the There's -- ratio reduction successful written of where of of we the been our outside in fixed benefit because fixed expenses our probably not the to but that our extent a holding the we have able and make can't can't premium the is and continue significant we're those

Mark Hughes

Can impact roughly what you accrual quarter? say that the comp the was? What fourth the catch-up in was expense

Michael Paquette

few me $X talking to term, let's say for that it was a term, tough this, short million It's long but million. say dollars, we're

Mark Hughes

sense your recent Okay. compared of That sort trends. to makes

Operator

Antonello This the to of for remarks. does program further question-and-answer today's like the conclude Kathy I'd back to program. session any hand

Katherine Antonello

look thank and for you us Jonathan. I joining great you meeting weekend. all you, morning. April a to Have again thank in this forward So, with

Operator

in Thank the and program. This your does conclude you. participation conference. gentlemen, ladies And you, for thank today's

day. Good disconnect. now may You

Employers (EIG) 17 Feb 232022 Q4 Earnings call transcript