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EH

Employers Holdings, Inc. (EIG)·Q1 2025 Earnings Summary

Executive Summary

  • Adjusted EPS of $0.87 beat S&P Global Primary EPS consensus of $0.76; GAAP diluted EPS was $0.52 as equity market-driven unrealized losses reduced reported earnings . Revenue (total) of $202.6M missed the $217.9M consensus, driven by $(12.8)M of net realized/unrealized losses versus $11.4M gains a year ago *.
  • Underwriting metrics were mixed: combined ratio ex-LPT rose to 102.8% (vs. 95.5% in Q4’24 and 101.2% in Q3’24) as the accident-year loss ratio was increased to 66.0%, reflecting industry pressures (e.g., CA cumulative trauma claims) and a competitive rate environment .
  • Net investment income rose 20% YoY to a record $32.1M on private equity LP returns and higher book yields; adjusted net income increased 24% YoY to $21.3M .
  • Capital return accelerated: quarterly dividend raised 7% to $0.32 and a new $125M repurchase authorization was approved; $27.5M returned to shareholders in Q1 (repurchases + dividend) .
  • Near-term stock catalysts: capital return actions; monitoring WCIRB’s proposed 11.2% pure premium rate increase in CA and industry rate firming (EIG internal 6-month rates up ~4–5%) that could support pricing and margins .

What Went Well and What Went Wrong

What Went Well

  • Net investment income reached $32.1M (+20% YoY), “meaningfully higher than any other quarter in our history” per CEO, driven by private equity LP returns and higher fixed income yields .
  • Expense discipline: underwriting expense ratio improved to 23.4% from 25.0% YoY; commission ratio declined to 12.6% from 13.6% .
  • Franchise momentum: record policies in-force of 133,121 (+4% YoY) and continued appetite expansion into profitable classes; management confident in accelerating appetite expansion .

What Went Wrong

  • Combined ratio ex-LPT increased to 102.8% as the current accident-year loss ratio rose to 66.0% vs. 64.2% in Q4’24, reflecting competitive rates, pressure in AY23–24, and CA cumulative trauma claims .
  • Total revenue missed Street consensus due to $(12.8)M net realized/unrealized losses versus prior year gains; GAAP diluted EPS fell to $0.52 (from $1.11), highlighting investment market volatility impact on reported earnings .
  • New business softness: rate increases and underwriting actions to maintain targets weighed on new business; audit premium reductions consistent with moderating wage/employment growth .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net premiums earned ($M)$186.6 $190.2 $183.0
Net investment income ($M)$26.6 $26.7 $32.1
Net realized/unrealized gains (losses) ($M)$10.9 $(0.4) $(12.8)
Total revenues ($M)$224.0 $216.6 $202.6
EPSQ3 2024Q4 2024Q1 2025
Diluted EPS (GAAP)$1.21 $1.14 $0.52
Adjusted diluted EPS (Non-GAAP)$0.81 $1.15 $0.87
Underwriting metrics (ex-LPT)Q3 2024Q4 2024Q1 2025
Loss & LAE ratio (%)63.9% 59.5% 66.8%
Commission expense ratio (%)14.1% 12.8% 12.6%
Underwriting expense ratio (%)23.2% 23.2% 23.4%
Combined ratio (%)101.2% 95.5% 102.8%
KPIsQ3 2024Q4 2024Q1 2025
Policies in-force129,879 130,767 133,121
Book value/share incl. Deferred Gain$47.99 $47.35 $48.25
Adjusted book value/share$49.83 $50.71 $50.75

Non-GAAP notes: Adjusted results exclude LPT effects and net realized/unrealized investment gains/losses; see company definitions and reconciliations .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Regular quarterly dividend per shareQ2 2025$0.30 (Q1’25 declaration) $0.32 (payable May 28, 2025) Raised
Share repurchase authorizationThrough Dec 31, 2026Prior program authorization exhausted; ~$18.7M remained as of Feb 19, 2025 New $125.0M authorization from May 6, 2025 to Dec 31, 2026 Raised/new program
Accident-year loss & LAE ratio (voluntary)202564.0% maintained throughout 2024 66.0% in Q1 2025 Raised
Formal revenue/margin guidance2025None provided None provided Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
Accident-year loss ratio selection63.9% in Q3’24; CFO indicated 2025 pick would rise given industry trends Increased to 66.0%; drivers include competitive rates, AY23–24 pressure, CA cumulative trauma Cautious upward move
CA cumulative trauma claimsNot highlighted in Q3’24; broad industry conservatism Explicitly cited as rising; tied to WCIRB’s 11.2% pure premium filing Emerging headwind
Pricing/rate environmentCompetitive; internal 12-month rates flat, 6-month up 4–5% Confirmation of competitive environment; 6-month internal rates up 4–5% Modestly firming vs flat
Expense ratio23.2% in Q3’24; 23.2% in Q4’24 with Cerity integration savings 23.4%; management expects further improvement in 2025 Stable/improving
Investment income/yield+3% YoY in Q3’24; 4.5% book yield; duration ~4.5 yrs Record $32.1M; book yield 4.5%, duration 4.3 yrs Strengthening
Appetite expansion/digitalKey growth driver, API partnerships growing Continued expansion; confidence to accelerate Ongoing positive

Management Commentary

  • CEO: “We recorded our current accident year loss and LAE ratio on voluntary business at 66.0%, slightly above the 64.0% we maintained throughout 2024... We will evaluate our prior year reserves in more detail at mid-year” .
  • CEO: “Our net investment income was $32.1 million, up 20% from a year ago... primarily due to returns from our investments in limited partnerships” .
  • CFO: “Our adjusted net income... totaled $21.3 million, a 24% increase from last year’s $17.2 million” .
  • CEO on capital return: “We raised our regular quarterly dividend to $0.32... and announced a new $125.0 million share repurchase plan... reflect our strong balance sheet” .
  • CEO on macro: “To date, we have not experienced negative impacts from the tariff discussions, but we intend to closely monitor the cost of prescription drugs and medical services” .

Q&A Highlights

  • Loss trend drivers: Management raised the accident-year loss ratio to 66% due to competitive rates, pressure in AY23–24, and an uptick in CA cumulative trauma claims; selection remains below industry averages of ~69–70% .
  • Medical inflation/frequency/severity: Lost-time claim frequency generally trending down; CA frequency uptick tied to cumulative trauma; medical severity below pre-pandemic levels; indemnity severity in line with wage inflation .
  • CA cumulative trauma macro context: Filing post-termination in CA enables higher PD and attorney involvement; WCIRB proposed +11.2% pure premium rate increase effective 9/1/2025 citing cumulative trauma as one driver .
  • Rates: Internal rolling-12-month rates flat; rolling-6-month up 4–5%, aligning with observed industry anecdotes of rate firming .

Estimates Context

MetricQ4 2024 ConsensusQ4 2024 ActualQ1 2025 ConsensusQ1 2025 Actual
Primary EPS (USD)$1.09*$1.15 $0.76*$0.87
Revenue (USD)$221.175M*$216.6M $217.905M*$202.6M
# of EPS estimates3*—3*—
# of Revenue estimates2*—2*—

Values retrieved from S&P Global*.

Context:

  • Q1’25: EPS beat on an adjusted basis; revenue missed as net realized/unrealized losses swung to $(12.8)M vs. prior-year gains, diluting total revenue and reported GAAP EPS .
  • Q4’24: EPS modestly beat while revenue trailed consensus, amid lower favorable reserve development versus prior year .

Where estimates may adjust:

  • Near-term EPS models likely reflect higher accident-year loss pick (66%) and potential continued expense improvements; revenue models may incorporate investment market volatility and tempered audit premiums consistent with moderating wage/employment growth .

Key Takeaways for Investors

  • Capital return acceleration (dividend +7%, new $125M buyback) underscores balance sheet strength and underwriting capital, a supportive backdrop for total return positioning .
  • Adjusted earnings power intact: 24% YoY adjusted net income growth with record net investment income offsetting underwriting headwinds; focus on expense ratio improvement continues .
  • Underwriting caution warranted: raised accident-year loss ratio to 66% reflects competitive rates and CA cumulative trauma; watch WCIRB/NCCI developments and internal rate firming trajectory .
  • Mix shift and growth: appetite expansion to targeted classes and digital/API distribution remain growth levers with loss ratios comparable or better than traditional segments .
  • Book value compounding remains solid: BVPS incl. Deferred Gain up 12.3% YoY; adjusted BVPS up 8.5% YoY despite investment volatility .
  • Near-term trading: EPS beat (adjusted) vs. revenue miss; capital return announcements are positive catalysts; monitor macro/market-driven investment gains/losses given their impact on GAAP EPS .
  • Medium-term thesis: disciplined underwriting, improving expense ratio, and diversified investment income support value creation; watch CA claims trends, rate environment, and audit premium cadence as key margin drivers .

Appendix: Additional Detail

  • Q1’25 components: Losses & LAE $120.7M (+4% YoY), commission $23.0M (-8%), underwriting expenses $42.9M (-7%), tax expense $3.1M (19.5% effective rate) .
  • Capital actions executed: Repurchased 406,101 shares at $49.69 (Q1) and 170,000 at $48.35 (Apr 1–29) .
  • Non-GAAP definitions: Adjusted net income and adjusted EPS exclude LPT effects and net realized/unrealized investment gains/losses (net of tax); see reconciliations .