Employers Holdings’ first quarter performance was marked by a notable divergence between revenue and profitability, as sales came in below Wall Street expectations while non-GAAP profit surpassed consensus estimates. Management attributed the revenue decline primarily to lower new business and audit premiums, a direct result of targeted underwriting and pricing actions in specific states to maintain profitability. CEO Katherine Antonello emphasized that, despite these headwinds, the company reached a new high in policies in force, reflecting strong customer retention. She also highlighted “meaningful progress” in reducing the underwriting expense ratio, and pointed to a 20% year-over-year increase in net investment income, which helped offset pressure from higher loss ratios and softer top-line growth.

Is now the time to buy EIG? Find out in our full research report (it’s free).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions Employers Holdings’s Q1 Earnings Call

• Mark Hughes (Truist): asked about the increase in accident year loss and loss adjustment expense (LAE) ratios across geographies. CEO Katherine Antonello explained it reflects competitive rate environments, rising cumulative trauma claims in California, and reduced favorable loss development.
• Mark Hughes (Truist): inquired about underlying medical inflation, including frequency and severity of claims. Antonello responded that severity has held steady, with the uptick in California attributable to cumulative trauma claims, not broader medical cost increases.
• Mark Hughes (Truist): questioned whether macroeconomic factors contributed to increased cumulative trauma claims. Antonello clarified it is specific to California’s legal environment, not broader macro trends, and often involves claims filed post-termination.
• Mark Hughes (Truist): asked how industry reserve redundancies and rate trends compare. Antonello said reserve releases have slowed industry-wide and noted Employers’ internal rates were flat year-over-year but up 4-5% on a rolling six months.
• Mark Hughes (Truist): sought clarification on advisory rate filings in California. Antonello confirmed that filings are advisory and carriers have flexibility in setting rates based on their book of business.

Catalysts in Upcoming Quarters

In the next few quarters, our team will focus on (1) the effectiveness of Employers Holdings’ appetite expansion in driving quality new business, (2) further trends in cumulative trauma claims in California and any regulatory or legal responses, and (3) sustained progress in reducing the underwriting expense ratio. Additional attention will be paid to investment income trends and capital management actions that could influence shareholder returns.

Employers Holdings currently trades at $46.57, down from $47.98 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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