Employers Holdings, Inc. Q2 FY2025 earnings call

• Financial results: Gross written premium down 2.2%, net premiums earned up 5.6%, policies in force at record high, net investment income slightly higher. Accident year loss and LAE ratio increased due to California cumulative trauma claims. Commission and underwriting expense ratios reduced.
• Underwriting and pricing: Continues to refine underwriting and pricing approach for profitable growth.
• California Insurance Commissioner: Approval of increased rates in response to cumulative trauma claims and call for legislative changes.
• Capital management: Board declared $0.32 per share dividend, book value per share increased, $31.4 million returned to stockholders via dividends and repurchases.

Gross written premium decreased by 2.2% to $203.3 million compared to $207.9 million in the prior quarter, with declines in middle market new business offsetting growth in the small commercial segment. Net premiums earned increased 5.6% to $198.3 million due to strong net written premium in 2024. Policies in force ended the period at a record high with a year-over-year growth rate of 4.6%. Net investment income for the quarter was $27.1 million, slightly higher than Q2 2024. The current accident year loss and LAE ratio on voluntary business was 69% in Q2 2025, up from 66% in Q1 2025 due to cumulative trauma claims in California. Commission expense ratio was 13.2% this quarter, down from 13.9% a year ago, and underwriting expense ratio was 21.7% vs. 22.4% a year ago. Adjusted net income totaled $11.5 million, a 58.8% decrease from prior year's $27.9 million. The company repurchased $23 million of common stock in Q2 and additional $23 million in Q3.

• Dividend: Board declared third quarter 2025 quarterly dividend of $0.32 per share, payable August 27.
• Capital management: Continues strategic capital management, considering investment opportunities with favorable return on investment.
• Underwriting: Identifying and implementing refinements to underwriting and pricing for profitable growth.

• Cumulative trauma claims in California: Rapid rise in claims impacting loss and LAE ratios, uncertainty around new trend; need for full actuarial study in Q3.
• Tariff uncertainties: Monitoring cost of prescription drugs and medical services for potential changes, no direct impacts yet.

Q: Reflect on how cumulative trauma claims have emerged and triggered action this quarter A: Katherine Holt Antonello discussed California's unique treatment of cumulative trauma claims, spread from LA to other areas, frequency vs. severity, and multipronged approach including pricing, risk selection, and claim management.

Q: Confidence in reflecting trend in reserves A: Katherine Holt Antonello mentioned a multipronged approach and confidence in accident year 2025, with significant favorable development in older accident years moved to recent ones.

Q: Capital management and excess capital A: Mike Pedraja stated they have excess capital, prioritize supporting growth and technology, and will consider capital management based on ROI.

Q: Nuances in cumulative trauma claims across book A: Katherine Holt Antonello said no specific class, size, or industry trend, except geographic spread from LA to Bay Area and Sacramento.

Q: Reserve study in Q3 A: Katherine Holt Antonello said it will be similar to Q2 but focused on cumulative trauma, not a typical study.

Q: Cumulative trauma claims in other states A: Katherine Holt Antonello said other states have narrowly defined claims, so no frequency change like California.

Q: Reserve study external opinions A: Katherine Holt Antonello said they do external studies but not at end of Q3