8-K: Employers Holdings Reports Solid Q4 and Full-Year 2024 Results, Boosted by Investment Income

Employers Holdings, Inc. announces its fourth quarter and full-year 2024 financial results, highlighting record levels of written and earned premium, ending in-force policies, and net investment income.

Summary

• Employers Holdings, Inc. reported its financial results for the fourth quarter and full year ended December 31, 2024.
• Full-year net income was $118.6 million ($4.71 per diluted share), compared to $118.1 million ($4.45 per diluted share) in the previous year.
• Adjusted net income for the full year was $94.0 million ($3.73 per diluted share), versus $101.7 million ($3.83 per diluted share) in 2023.
• Net investment income reached $107.0 million for the year, up from $106.5 million.
• Gross premiums written were $776.3 million, an increase from $767.7 million.
• Net premiums earned increased to $749.5 million from $721.9 million.
• The company reported $18.4 million in net favorable prior year loss reserve development, compared to $44.9 million in the prior year.
• The GAAP combined ratio was 97.9% (98.6% excluding the LPT), compared to 95.0% (96.0% excluding the LPT) in the previous year.
• Employers Holdings returned $71.7 million to stockholders through share repurchases and dividends.
• The company achieved a record number of 130,767 ending policies in-force, compared to 126,409 in the prior year.
• Adjusted book value per share rose by 9.8% to $50.71, including dividends declared.
• For the fourth quarter, net income was $28.3 million ($1.14 per diluted share), compared to $45.6 million ($1.77 per diluted share) in the fourth quarter of 2023.
• Adjusted net income for the quarter was $28.7 million ($1.15 per diluted share), versus $36.1 million ($1.40 per diluted share).
• Net investment income for the quarter was $26.7 million, compared to $26.2 million.
• Gross premiums written were $176.3 million, a slight decrease from $178.2 million.
• Net premiums earned were $190.2 million, an increase from $187.5 million.
• The company reported $9.1 million in net favorable prior year loss reserve development, compared to $24.9 million.
• The GAAP combined ratio was 95.5% (including and excluding the LPT), compared to 88.1% (88.8% excluding the LPT).
• Employers Holdings returned $17.5 million to stockholders through share repurchases and dividends.
• The Board of Directors declared a first quarter dividend of $0.30 per share, payable on March 19, 2025, to stockholders of record as of March 5, 2025.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While the company reports record levels in some areas, there are also declines in adjusted net income and increased combined ratio, indicating mixed performance.

Positives

• The company achieved record levels of written and earned premium, ending in-force policies, and net investment income in 2024.
• The company's AM Best Financial Strength Rating was upgraded to A (Excellent).
• Adjusted book value per share increased by 9.8% to $50.71, including dividends declared.
• The company returned $71.7 million to stockholders through share repurchases and dividends in 2024.
• The company is focusing on appetite expansion, increased self-service options, and greater operational efficiencies for 2025.
• The Board of Directors declared a first quarter dividend of $0.30 per share.

Negatives

• Adjusted net income for the full year decreased to $94.0 million ($3.73 per diluted share) from $101.7 million ($3.83 per diluted share) in 2023.
• Net favorable prior year loss reserve development decreased to $18.4 million from $44.9 million in the prior year.
• The GAAP combined ratio increased to 97.9% (98.6% excluding the LPT) from 95.0% (96.0% excluding the LPT) in the previous year.
• Gross premiums written for the fourth quarter decreased slightly to $176.3 million from $178.2 million.
• Losses and loss adjustment expenses increased by 22% in the fourth quarter.

Risks

• The company acknowledges the California wildfires and their potential impact on small businesses, though they do not anticipate a significant impact on their results.
• The company's future performance is subject to risks and uncertainties, including economic and market conditions, legislative or regulatory actions, and catastrophic events.

Future Outlook

The company's focus for 2025 will be on further appetite expansion, increased self-service options for policyholders, agents and injured workers and greater operational efficiencies.

Management Comments

• CEO Katherine Antonello stated that they are pleased with the fourth quarter and full-year 2024 results.
• Ms. Antonello noted that the company closed the year with the highest levels of written and earned premium, ending in-force premium and policies and net investment income in the company's history.
• Ms. Antonello mentioned that the company achieved solid growth in new and renewal premium in 2024, but that growth was offset by lower final audit premiums and endorsements.
• Ms. Antonello stated that the company's investment performance contributed nicely to overall results and financial strength.
• Ms. Antonello noted that the company's current accident year loss and LAE ratio on voluntary business was 64.0%, slightly above the loss and LAE ratio maintained throughout 2023 and consistent with that of 2022.
• Ms. Antonello stated that the company's active capital management efforts throughout 2024 contributed to year-over-year increases of 10.6% and 9.8% in book value per share including the deferred gain and adjusted book value per share, respectively.
• Ms. Antonello stated that the company's focus on disciplined underwriting, prudent risk management, and strategic investments has positioned them strongly in the workers' compensation insurance market.
• Ms. Antonello stated that the company continues to offer direct-to-consumer policies through the Cerity brand without any meaningful fixed underwriting expenses.

Industry Context

The company operates in the workers' compensation insurance market, focusing on small and mid-sized businesses in low-to-medium hazard industries. The upgrade to their AM Best Financial Strength Rating to A (Excellent) indicates a strong position within the industry.

Comparison to Industry Standards

• The company's combined ratio of 97.9% for the full year 2024 is a key metric for assessing underwriting profitability in the property and casualty insurance industry.
• A combined ratio below 100% indicates profitable underwriting, while a ratio above 100% indicates an underwriting loss.
• Companies like The Travelers Companies, Inc. and W. R. Berkley Corporation are also major players in the commercial insurance market and their combined ratios are often used as benchmarks.
• The company's focus on small to medium sized businesses is similar to that of competitor Hartford Financial Services Group.
• The company's investment portfolio is similar to that of other insurance companies, with a focus on fixed maturity securities and equity securities.

Stakeholder Impact

• Shareholders will receive a first quarter dividend of $0.30 per share.
• The company's focus on safer work environments benefits employees of its client businesses.
• The company's direct-to-consumer policies through Cerity provide fast and affordable coverage options for small businesses.

Next Steps

• The company will host a conference call on February 21, 2025, to discuss the earnings results.
• The company will continue to focus on appetite expansion, increased self-service options, and greater operational efficiencies for 2025.

Key Dates