Employers Holdings (EIG) Tops Q1 EPS by 4c, Revenues Beat

April 22, 2021 4:17 PM EDT

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Employers Holdings (NYSE: EIG) reported Q1 EPS of $0.51, $0.04 better than the analyst estimate of $0.47. Revenue for the quarter came in at $163.6 million versus the consensus estimate of $160.96 million.

Financial Highlights

  • Record number of ending policies in-force (104,772), up 3.3% year-over-year and up 1.2% since year-end;
  • Net income of $23.1 million, or $0.80 per diluted share;
  • Adjusted net income of $14.7 million, or $0.51 per diluted share;
  • Net pretax realized and unrealized gains on investments recorded through the income statement of $10.9 million;
  • Net investment income of $18.4 million, down 8% year-over-year;
  • Net premiums earned of $133.9 million, down 20% year-over-year;
  • Favorable prior year loss reserve development on voluntary business of $13.4 million, versus $3.0 million a year ago;
  • The Company repurchased 298,546 shares of its common stock at an average price of $32.21 per share;
  • Book value per share including the Deferred Gain of $46.00, down 1.3% for the quarter including dividends declared.

Management Commentary

Chief Executive Officer Katherine Antonello commented: “During the first quarter, we delivered a 4.8% annualized return on adjusted equity and a combined ratio of 93.9% within our largest operating segment, Employers. These were favorable operating results considering the challenging macro-economic environment for small businesses, however our top line continues to be adversely impacted by a meaningful decrease in new business premium and lower average policy sizes as a result of the ongoing COVID-19 pandemic.

While our new business premium production did not meet our expectations in January and February, we are encouraged by the rebound we experienced in March and are experiencing thus far in April. We closed the quarter with another record number of policies in-force, which demonstrates that our policyholders are enduring the pandemic and small businesses are shopping for workers compensation coverage. As widespread vaccination occurs and the labor market improves, we are optimistic that rising payrolls will serve to increase premium. In support of this anticipated recovery, we have continued to pursue and advance the significant investments we have made in delivering a superior customer experience for our agents.

Regarding our expenses, during the first quarter: (i) we underwent a reduction-in-force, which impacted approximately 7% of our workforce; (ii) our former Chief Executive Officer retired, as planned; and (iii) we realigned the organization to increase efficiency and generate cost savings. As a result, our first quarter underwriting and general and administrative expenses of $46.6 million will be the high-water mark for 2021 and you can expect to see immediate and significant expense reductions for the remainder of the year.”

Ms. Antonello continued, “Our Cerity operating segment, which offers digital workers’ compensation insurance solutions directly to consumers, is gaining traction and has already written close to $500,000 in premium thus far in 2021. While the low-to-medium hazard direct to consumer workers’ compensation market is relatively immature and Cerity is an early entrant in this space, we believe that its technological and intellectual capabilities will support our future growth initiatives, deliver greater pricing precision and flexibility, and provide direct access to workers' compensation insurance for customers seeking an online experience.

In summary, our primary goal for 2021 remains unchanged. We are preparing to fully capitalize on the upcoming labor market improvement, while continuing to maintain underwriting discipline and actively managing our expenses. Our balance sheet and capital position are very strong and are highly supportive of these initiatives.”

For earnings history and earnings-related data on Employers Holdings (EIG) click here.

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