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EH

Employers Holdings, Inc. (EIG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered solid underwriting profitability ex-LPT (combined ratio 95.5%) and stable investment income, but EPS declined year over year on lower prior-year reserve releases and fewer investment gains; quarter-over-quarter underwriting improved versus Q3’s 101.2% ex-LPT combined ratio .
  • Top-line trends were mixed: net premiums earned grew 1% YoY to $190.2M while total revenues fell 4% YoY to $216.6M on lower realized/unrealized gains; gross written premiums were down 1% YoY as higher new/renewal writings were offset by lower final audit premiums/endorsements .
  • Management does not give formal guidance, but indicated the 2025 accident-year loss and LAE ratio will be increased given the competitive rate environment and actuarial trend selections, with continued focus on expense ratio reductions to partially offset .
  • Capital returns remain a support: $17.5M returned in Q4 (buybacks and dividend), $0.30/share Q1’25 dividend declared, and $18.7M repurchase authorization remaining; AM Best upgraded insurer FSRs to A (Excellent), reinforcing balance sheet strength .
  • Estimates context: S&P Global consensus for Q4’24 EPS/revenue was unavailable due to system limit; result-level surprise versus Street cannot be assessed. Management’s directional 2025 loss pick increase and investment portfolio shift toward higher-yield RMBS are the key estimate revision drivers .

What Went Well and What Went Wrong

What Went Well

  • Underwriting improved sequentially: ex-LPT combined ratio fell to 95.5% from 101.2% in Q3, aided by favorable reserve development and lower expense ratio (23.2% vs. 24.6% LY) .
  • Investment income steady with improving book yield: Q4 NII $26.7M (+2% YoY), with CFO highlighting December repositioning into ~6% RMBS expected to uplift 2025 NII; ending weighted average book yield rose to 4.5% from 4.3% .
  • Balance sheet/ratings strength: AM Best upgraded insurer FSRs to A (Excellent), citing strongest balance sheet strength and improved margins; adjusted BVPS rose 9.8% in 2024 to $50.71 including dividends .
  • CEO quote: “We closed the year with the highest levels of written and earned premium, ending in-force premium and policies and net investment income in the Company’s history.” .

What Went Wrong

  • YoY EPS and combined ratio deterioration: Diluted EPS fell to $1.14 from $1.77 on lower prior-year reserve releases ($9.1M vs $24.9M) and fewer investment gains; GAAP combined ratio worsened to 95.5% vs 88.1% .
  • Growth headwinds in audits/endorsements: Gross written premiums declined 1% as higher new/renewal writings were offset by lower final audit premiums and endorsements; management also noted decelerating wage growth reduced audit pickups .
  • Industry/loss pick pressure: Management plans to increase the 2025 accident-year loss and LAE ratio (directional headwind), reflecting competitive pricing and higher actuarial trends, only partially offset by expense ratio improvements .

Financial Results

Headline P&L, EPS, and Margins (chronological columns: Q4 2023 → Q3 2024 → Q4 2024)

MetricQ4 2023Q3 2024Q4 2024
Total Revenues ($M)$225.7 $224.0 $216.6
Net Premiums Earned ($M)$187.5 $186.6 $190.2
Net Investment Income ($M)$26.2 $26.6 $26.7
Diluted EPS (GAAP)$1.77 $1.21 $1.14
Adjusted Diluted EPS$1.40 $0.81 $1.15
GAAP Combined Ratio88.1% 100.4% 95.5%
Combined Ratio ex-LPT88.8% 101.2% 95.5%
Loss & LAE Ratio (GAAP)49.5% 63.1% 59.5%
Commission Expense Ratio14.0% 14.1% 12.8%
Underwriting & G&A Expense Ratio24.6% 23.2% 23.2%

Notes: Q4’24 YoY EPS decline reflects lower prior-year reserve releases ($9.1M vs $24.9M) and much lower net realized/unrealized gains (-$0.4M vs +$12.1M) .

Premiums, Reserve Development, and Key Ratios

KPIQ4 2023Q3 2024Q4 2024
Gross Premiums Written ($M)$178.2 $181.2 $176.3
Net Favorable Prior-Year Dev. ($M)$24.9 ~$0.1 (none recognized in Q3 due to no full reserve study) $9.1
Current AY Loss & LAE Ratio ex-LPT63.5% 63.9% 64.2%
Policies In-Force (ending)126,409 (FY23 YE) 129,879 130,767 (FY24 YE)

Capital Returns and Balance Sheet Highlights

MetricQ4 2023Q3 2024Q4 2024
Share Repurchases—163,221 shs @ $45.27 avg 193,857 shs @ $51.20 avg
Dividend Declared$0.28/sh (prior year Q4 dividend) $0.30/sh (pay 11/27/24) $0.30/sh (pay 3/19/25)
Adjusted BVPS$47.26 (YE23) $49.83 $50.71 (YE24)
Ending Book Yield (fixed income, cash)4.3% (YE23) 4.4% (Q3) 4.5% (YE24)

Segment breakdown: Not applicable (monoline workers’ compensation writer) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Accident-Year Loss & LAE Ratio (voluntary)FY 2025No prior numeric guidanceManagement expects to increase the 2025 accident-year loss & LAE ratio given competitive rates and actuarial trends Raised (directional)
Expense RatioFY 2025No prior numeric guidanceContinued focus on reductions; 2024 U/W & G&A ratio 23.5% vs 24.9% LY; Q4 23.2% Lower (directional)
Net Investment IncomeFY 2025No prior numeric guidancePortfolio repositioning into ~6% RMBS in Dec expected to lift 2025 NII (trade done late Q4) Higher (directional)
Tax RateOngoingHistorical 18–22% quarterly effective rates No formal guidance; Q4 effective rate 18.4% Maintained (informational)
DividendQ1 2025$0.30/sh (Q3’24) $0.30/sh declared payable 3/19/25 Maintained
Share RepurchaseOngoing$38.6M remaining (as of 10/30/24) $18.7M remaining (as of 2/19/25) Decreased capacity (utilization)

Note: Company does not provide formal earnings or margin guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3 2024)Current Period (Q4 2024)Trend
Pricing/AY Loss PickCY loss ratio recorded at 64.0% in Q2; Q3 CY 63.9%; competitive rate environment noted Expect to increase 2025 accident-year loss & LAE ratio due to actuarial trends and competition Slightly more conservative
Expense Ratio (Cerity integration)U/W & G&A ratio down to 22.0% in Q2; 23.2% in Q3; savings from Cerity integration Q4 U/W & G&A 23.2%; full-year 23.5% vs 24.9% LY; continued focus on further reductions Improving/in focus
Audit Premiums/Wage GrowthQ2 and Q3: lower final audit premiums offset new/renewal growth Wage growth deceleration reduced audit pickups, pressuring net written premium Headwind persists
Investment StrategyQ2/Q3 steady NII; FHLB strategy unwound in 4Q23; book yield rising December RMBS purchase (~6% yields) via FHLB LOC to release low-yield deposits; expected NII uplift in 2025 Positive NII outlook
Reserve DevelopmentQ2 favorable $9.1M; Q3 effectively none (no full reserve study) Q4 favorable $9.1M; largely AY ≤2020; some strengthening in 2021/2023 noted for large losses Normalizing from 2023 levels
Distribution/Technology (API/digital)API/digital partner focus discussed; continued expansion Accelerating digital partnerships; appetite expansion generated $35M or 20% of new/renewal in Q4 Expanding channels
Ratings/CapitalStrong capital and rising BVPS AM Best upgrade to A (Excellent); continued buybacks/dividends Strengthening

Management Commentary

  • CEO (press release): “We closed the year with the highest levels of written and earned premium, ending in-force premium and policies and net investment income in the Company's history.” .
  • CEO (call): “Tenth straight year of achieving an underwriting profit… We remain laser-focused on achieving further reductions to [the expense] ratio going forward.” .
  • CFO (call): “We increased our letter of credit… to liberate lower-yielding assets… and went long residential mortgage-backed securities yielding near 6%… [which] will have a little bit of an uplift in our net investment income for next year.” .
  • CEO (call): “We do expect to increase our accident year loss and LAE ratio in 2025… driven by higher actuarial trend selection and the ongoing competitive rate environment.” .

Q&A Highlights

  • 2025 loss pick: Management will raise the 2025 accident-year loss & LAE ratio; degree not specified; expense ratio declines expected to be a meaningful offset .
  • Drivers of higher loss pick: More conservative actuarial trends amid competitive pricing; frequency trending down; medical severity relatively mild vs pre-pandemic; indemnity tracking with wage inflation .
  • Wage and audit dynamics: Decelerating wage growth reduced audit pickups, pressuring net written premiums; still strong YoY wage growth, but slower than prior year .
  • Investment repositioning: FHLB LOC enabled sale of low-yield assets and purchase of ~6% RMBS; expected to raise NII in 2025, not reflected in Q4 results due to December timing .
  • Hazard mix/appetite: Expansion into higher hazard groups is selective, targeting lower-hazard risks within those groups; still ~91–92% in hazard categories A–E in recent quarters .
  • Reserve development: Q4 favorable development mostly from AY 2020 and prior; some strengthening in AY 2021 and 2023 due to large losses .

Estimates Context

  • S&P Global consensus for Q4 2024 EPS and revenue was unavailable due to a system request limit. As a result, we cannot determine beat/miss versus Street for this quarter. Management does not provide formal guidance; we expect analysts to adjust 2025 assumptions for a higher accident-year loss pick, modestly lower expense ratio, and slightly higher NII from the RMBS repositioning .

Key Takeaways for Investors

  • Sequential underwriting improvement into Q4 (ex-LPT combined ratio 95.5% vs 101.2% in Q3) suggests momentum exiting 2024 despite YoY reserve/gains headwinds .
  • 2025 setup: Expect a higher accident-year loss pick (pricing competition, actuarial trends) partially offset by continuing expense leverage; underwriting profitability depends on achieving planned expense reductions .
  • Investment income tailwind: December RMBS purchases near ~6% yields should lift 2025 NII; rising book yield (4.5% YE24 vs 4.3% LY) supports earnings durability in a higher-for-longer rate context .
  • Capital management remains shareholder-friendly (buybacks, $0.30 dividend), underpinned by an A (Excellent) AM Best upgrade and strong adjusted BVPS growth (+9.8% in 2024 including dividends) .
  • Growth mix watch: New/renewal growth offset by lower audits/endorsements amid moderating wage growth; monitor API/digital channels and appetite expansion (20% of Q4 new/renewal) for sustainable premium growth .
  • Reserve normalization: Favorable prior-year development moderated versus 2023; future earnings cadence likely less dependent on reserve releases, increasing the importance of core underwriting and NII .
  • With Street estimates unavailable this quarter, catalysts include formal 10-K reserve disclosures, evidence of expense ratio progress, and confirmation of NII uplift in Q1–Q2 2025 prints .

Additional Documents Reviewed (Q4 2024 cycle)

  • 8-K and press release with financial supplement (Q4’24 and FY’24) -.
  • Q4 2024 earnings call transcript (full) -.
  • AM Best rating upgrade press release (Jan 8, 2025) .
  • Prior quarters’ press releases for trend analysis: Q3 2024 (Oct 30, 2024) -; Q2 2024 (July 31, 2024) -.

Sourcing notes: All figures and quotes are from company filings/press releases/transcripts as cited. S&P Global consensus data was unavailable for Q4 2024 due to a system request limit; therefore, beat/miss vs. estimates is not assessed.