Reno, NV – Employers Holdings, Inc. (NYSE:EIG), a holding company with subsidiaries that are specialty providers of workers’ compensation insurance and services focused on select, small businesses engaged primarily in low-to-medium hazard industries, recently reported financial results for its third quarter ended September 30, 2022.
Financial Highlights
- Gross premiums written of $188.6 million, up 24% year-over-year;
- Net premiums earned of $178.7 million, up 21% year-over-year;
- Record number of ending policies in-force of 120,147, up 9.4% year-over-year;
- Net investment income of $23.7 million, up 29% year-over-year;
- Net income of $19.1 million, $0.70 per diluted share;
- Adjusted net income of $15.5 million, $0.56 per diluted share;
- The Company repurchased 186,799 shares of its common stock at an average price of $39.72 per share.
Management Commentary
Chief Executive Officer Katherine Antonello commented: “I am very pleased with our third quarter 2022 results. Our written and earned premiums have risen sharply in both the current quarter and the first nine months, and for the eighth consecutive quarter we achieved a record number of policies in-force. This growth resulted from strong new and renewal business writings within our Employers segment, robust new business writings within our Cerity segment and further audit premium recognition.
We maintained our current accident year loss and LAE ratio on voluntary business at 64.0%, largely consistent with the 63.5% we recorded throughout 2021. We did not adjust our loss and LAE reserves this period as our third quarter reserve review was consistent with our expectations. We will evaluate our prior year reserves in more detail at year-end when we routinely perform a full reserve study.”
Ms. Antonello continued, “We remain committed to maintaining the highest level of underwriting discipline as we continue to thoughtfully execute our growth strategy for both Employers and Cerity. The additional classes of business that we are writing are complementary to our business model and are contributing nicely to our top-line growth. In addition, our consolidated underwriting expense ratio of 23.4% this quarter is the lowest it has been since the fourth quarter of 2018.
Our Cerity operations, which offers digital workers’ compensation insurance solutions directly to consumers, experienced meaningful premium growth again this quarter, due to both its appetite expansion and its collaboration with Intuit’s QuickBooks and, more recently, Thimble. Cerity expects to develop additional strategic opportunities which will support our growth initiatives by attracting an untapped segment of our target market.
The sharp increases in market interest rates that have occurred throughout the first nine months of 2022 have significantly benefited our net investment income while generating unrealized investment losses from our short duration fixed maturity portfolio. When coupled with unrealized losses from our equity portfolio, the impact was a decline in our book value and book value per share metrics.
Our balance sheet and underwriting capital remain very strong and are highly supportive of our continued growth and success.”
Summary of Third Quarter 2022 Results
(All comparisons vs. the third quarter of 2021, unless noted otherwise).
Gross premiums written were $188.6 million, an increase of 24%. The increase was primarily due to higher new and renewal premiums and higher final audit premiums. Net premiums earned were $178.7 million, an increase of 21%.
Losses and loss adjustment expenses were $112.3 million, an increase of 23%. The increase was primarily due to higher earned premiums. The Company did not recognize any prior year loss reserve development on its voluntary business during the third quarters of 2022 and 2021.
Commission expenses were $25.3 million, an increase of 27%. The increase was due primarily to higher earned premiums and higher 2022 agency incentive accruals.
Underwriting and general and administrative expenses were $41.9 million, an increase of 12%. The increase resulted primarily from higher premium taxes, assessments and bad debt expenses, each of which vary with earned premium.
Net investment income was $23.7 million, an increase of 29%. The increase was primarily due to higher bond yields and higher invested balances of fixed maturity securities and cash and cash equivalents, as measured by amortized cost.
Income tax expense was $4.7 million (19.7% effective rate) versus $3.6 million (19.4% effective rate). The effective rates during each of the periods presented included income tax benefits and exclusions associated with tax-advantaged investment income, LPT adjustments, and deferred gain amortization.
The Company’s book value per share of $33.79 and book value per share including the Deferred Gain of $37.77 decreased by 5% and 4% during the third quarter of 2022, respectively, computed after taking into account dividends declared. These measures were adversely impacted by $60.3 million of after-tax unrealized losses arising from fixed maturity securities (which are reflected on the balance sheet) and $2.4 million of net after tax unrealized losses arising from equity securities and other investments (which are reflected on the income statement).
The complete results release is available here: Employers Holdings, Inc. Third Quarter 2022 Results
Source: Employers