Reno, NV – Employers Holdings, Inc. (NYSE:EIG) recently reported net income, net income excluding the impact of the LPT and operating income of $24.8 million ($0.75 per diluted share), $21.7 million ($0.66 per diluted share), and $19.7 million ($0.60 per diluted share), respectively, for the second quarter of 2017.
The Company’s net income for the second quarter of 2017 decreased $2.0 million year-over-year. This decrease reflects non-routine adjustments made to LPT reserves and the LPT contingent profit commission in the second quarter of 2016, which served to reduce our losses and loss adjustment expense (LAE) and raise net income by $4.9 million during that period.
The Company’s net income before the impact of the LPT and operating income increased by $2.5 million and $4.3 million, respectively, year-over-year. These increases reflect a lower combined ratio for the current period, driven primarily from a reduction in the current accident year loss and LAE expense ratio.
Chief Executive Officer Douglas Dirks commented on the results:
“We produced another quarter of strong financial and operating results. Excluding impacts of the LPT, our net income increased 13%, or eight cents per diluted share, and our combined ratio improved 3.7 percentage points, demonstrating our disciplined underwriting and sound investment strategies. Final audit premium declined $6.2 million in the current quarter relative to the same period last year, driving the 3% decline in top line year-over-year. We achieved an annualized return on adjusted equity of 8.1%, 1.2 percentage points higher than last year’s second quarter. Our balance sheet remained strong as we continued to grow stockholders’ equity and book value per share. We again drove strong new business growth and maintained high levels of retention for our in-force policies, despite competitive market conditions, while improving loss costs.”
Summary of Second Quarter 2017 Results
(All comparisons vs. second quarter 2016, unless noted otherwise).
- The combined ratio before the impact of the LPT decreased 3.7 percentage points to 95.1%, driven by a lower current accident year loss and LAE ratio.
- The loss ratio before the LPT of 63.6% decreased 3.8 percentage points reflecting a higher current accident year loss ratio in last year’s second quarter related to four large losses and the continued impacts of key business initiatives including: an emphasis on settling open claims; diversifying our risk exposure across geographic markets; and leveraging data-driven strategies to target, underwrite and price profitable classes of business across all of our markets.
- The commission expense ratio of 12.5% increased 0.1 percentage point due to an increase in partnership and alliance business.
- The underwriting and other expense ratio of 19.0% was flat.
Gross written premiums of $184.5 million decreased $6.1 million due to a decline of $6.2 million in final audit premium compared with the second quarter of 2016. Final audit pickup continued to be positive with employers reporting higher payrolls at final audit driven by increases in hours worked and the number of full-time employees. We experienced strong new business growth but lower renewal business overall, driven by one of our territories in California.
In-force premium in states outside California grew 1.9% and in-force premium in California increased by 0.5%. Policy count outside of California grew 5.2% while policy count in California declined 3.5%. Retention remained high and average renewal rates decreased slightly by 1.8% year-to-date.
Net investment income of $18.2 million decreased $0.2 million relative to the second quarter of last year. Net realized gains on investments were $1.1 million versus $6.0 million in the second quarter of last year when equity securities were sold as part of a routine rebalancing of the equity portfolio.
In May of 2017, the Company redeemed $12.0 million of notes payable for $9.9 million, resulting in a $2.1 million pre-tax gain.
The Company’s effective tax rate of 23.9% was slightly higher than that of a year ago due mainly to the non-routine LPT adjustments made in the second quarter of 2016, as previously described.
Stockholders’ Equity including the Deferred Gain, Second Quarter 2017 Dividend Declaration
Stockholders’ equity including the deferred reinsurance gain was $1,068.1 million, an increase of 4.1% year-over-year.
The Board of Directors declared a third quarter 2017 dividend of $0.15 per share. The dividend is payable on August 23, 2017 to stockholders of record as of August 9, 2017.
The complete results release is available here: Employers Holdings, Inc. Reports Second Quarter 2017 Results