Reno, NV – Employers Holdings, Inc. (NYSE:EIG) recently reported net income and net income excluding the impact of the LPT of $23.2 million ($0.70 per diluted share) and $20.3 million ($0.62 per diluted share), respectively, for the first quarter of 2017. Operating income was $18.9 million ($0.57 per diluted share) for the quarter ended March 31, 2017. The Company’s underwriting and other operating expense ratio and loss ratio before the LPT decreased in the quarter. The Company’s commission expense ratio increased slightly over the previous year’s first quarter.
Chief Executive Officer Douglas Dirks commented on the results:
“We are pleased with our first quarter 2017 results. Today we reported higher premiums, underwriting income and investment income for the first quarter compared with the comparable period last year. We achieved an annualized return on adjusted equity of 8%, consistent with last year’s first quarter, as we grew stockholders’ equity and book value per share. We continue to drive strong new business growth and maintain high levels of retention for our in-force policies, despite competitive market conditions, while improving loss costs. Our claim trends continue to be positive in terms of declining frequency and we have been successful in closing claims on an accelerated basis.
“Given the strength of our balance sheet, the strong execution of our underwriting, claims and investment strategies and our active capital management, we believe that we are well positioned for the current market cycle.”
First Quarter 2017 Results
(All comparisons vs. first quarter 2016, unless noted otherwise).
Net income of $23.2 million increased $1.4 million. The increase in net income reflects increases in net investment income, realized gains, underwriting income, net earned premium, lower underwriting and other operating expenses and slightly higher income tax expense. Our effective tax rate of 21.4% was consistent with that of the first quarter of 2016.
- The combined ratio before the impact of the LPT remained strong at 96.6%.
- The loss ratio before the LPT of 63.8% decreased 0.2 percentage points.
- The commission expense ratio of 12.3% increased 0.5 percentage points due to higher base commissions paid in the first quarter of 2017 and a true-up of agency incentive commissions that lowered our commissions during the first quarter of 2016.
- The underwriting and other expense ratio of 20.4% decreased 0.6 percentage points due to lower bad debt, premium taxes and assessments.
Gross written premiums of $197.6 million increased $6.9 million due to higher final audit premium and new business growth. The increase in final audit pickup can be attributed to higher payroll at final audit driven by increases in hours worked and the number of full-time employees.
In-force premium in states outside California grew 0.8% while in-force premium in California decreased by 1.5%. Policy count outside of California grew 5.3% while policy count in California declined 5.0%. Retention remained high and overall renewal premiums were flat in the first quarter year-over-year with increases in payroll exposure being offset by a 1.8% decrease in average rate.
Net investment income of $18.8 million increased $1.0 million relative to the first quarter of last year, driven by an increase in invested assets and a slight shift in asset mix. Net realized gains on investments were $2.2 million in the first quarter compared with $1.5 million in the first quarter of last year.
Recently Adopted Accounting Standard
In March 2016 the Financial Accounting Standards Board issued Accounting Standards Update Number 2016-09, Compensation – Stock Compensation (Topic 718) that impacted the net tax benefits on the Company’s stock-based compensation. The Company elected to early adopt this standard in the third quarter of 2016 with an effective date of January 1, 2016. Adoption of this standard resulted in a $0.8 million reduction to income tax expense and a corresponding increase to net income for the three months ended March 31, 2016.
Stockholders’ Equity including the Deferred Gain, Second Quarter 2017 Dividend Declaration
Stockholders’ equity plus Deferred reinsurance gain – LPT Agreement was $1,039.4 million, an increase of 2.4% from year-end 2016, including an $8.0 million increase in after-tax net unrealized investment gains.
The Board of Directors declared a second quarter 2017 dividend of $0.15 per share. The dividend is payable on May 24, 2017 to stockholders of record as of May 10, 2017.
The complete results release is available here: Employers Holdings, Inc. First Quarter 2017 Results