Bob Farnam

Bob Farnam asked how Employers plans to compete and win business in the entrenched excess workers' compensation market, focusing on efficiency through AI and other factors. He also sought insights into the expected performance of this new product, including its combined ratio, the balance between expense and loss ratios, and its impact relative to the traditional book. Additionally, he questioned the pricing drivers, specifically if it's similar to primary workers' comp, and the envisioned proportion of total premiums from excess comp in the coming years.

Answer

CEO Kathy Antonello explained that Employers will focus on areas not efficiently provided by competitors, such as loss control and data ingestion, leveraging AI for faster quotes and processing extensive loss runs. She believes there's room for a new carrier given the specialized nature of the market. Ms. Antonello projected a mid-80s combined ratio for the excess comp product, with a strong expense ratio due to AI underwriting and a typically lower loss ratio than guaranteed cost business. She clarified that while pricing starts with state loss costs, the high self-insured retention makes it more severity-driven, offering diversification. Ms. Antonello expressed a hope for the excess comp product to represent 10% of overall written premium over the next 4-7 years.

Bob Farnam questioned the strategy for winning business in the competitive excess workers' compensation market, emphasizing the role of AI efficiency. He also sought insights into the expected performance metrics, such as combined ratio, expense ratio, and loss ratio, for this new product, its pricing dynamics, and its potential long-term contribution to total premiums.

Answer

CEO Kathy Antonello explained that Employers plans to differentiate by focusing on areas not efficiently provided by competitors, such as loss control and faster quoting through AI-driven data ingestion. She anticipates the excess workers' compensation product will achieve a combined ratio in the mid-80s, with a strong expense ratio due to AI and a lower loss ratio compared to guaranteed cost business. Antonello clarified that while pricing starts with state loss costs, the product is more severity-driven due to high self-insured retentions, offering diversification. She projected the product could eventually represent 10% of total written premium over 4-7 years.

Bob Farnam asked about submission trends in the excess and surplus (E&S) lines business and for Hanover's response to investors who believe the P&C hard market cycle has peaked.

Answer

President of Specialty Lines, Bryan Salvatore, confirmed that E&S submission and quote activity is 'very high and growing,' with a balanced property/casualty mix. President and CEO John 'Jack' C. Roche countered the 'peak market' narrative, citing an increasingly risky world with rising loss trends. He and CFO Jeff Farber emphasized that Hanover's balanced portfolio and multiple internal improvement levers (Personal Lines, NII, expenses) position it for strong returns regardless of broad market cycles.