Employers (EIG) - 2024 Q4 - Annual Report

Financial Performance - In 2024, the company reported net premiums written of $769.5 million, an increase from$ 760.6 million in 2023 and $707.2 million in 2022[48]. - Total revenues for 2024 were$ 880.7 million, compared to $850.9 million in 2023 and$ 713.5 million in 2022[48]. - The company achieved a net income of $118.6 million in 2024, slightly up from$ 118.1 million in 2023 and significantly higher than $48.4 million in 2022[48]. - New business premiums written in 2024 were$ 227.5 million, up from $201.9 million in 2023 and$ 167.7 million in 2022[38]. - Renewal premiums in 2024 reached $559.6 million, compared to$ 526.7 million in 2023 and $483.2 million in 2022[38]. - The company experienced net investment income of$ 107.0 million in 2024, compared to $106.5 million in 2023 and$ 89.8 million in 2022[43]. - The company ended 2024 with total assets of $3.5 billion, down from$ 3.6 billion in 2023[47]. Underwriting and Premiums - Total in-force premiums increased from $622.5 million in 2022 to$ 742.1 million in 2024, representing a growth of 19.2%[68]. - The number of policies in-force rose by 7.8% from 121,356 in 2022 to 130,767 in 2024[68]. - In-force premiums in California reached $336.1 million in 2024, up from$ 279.7 million in 2022, indicating a significant increase[69]. - The company targets small to mid-sized businesses in low-to-medium hazard industries, focusing on risks likely to generate loss ratios below the industry average[67]. - The average annual in-force premium per policyholder increased from $5,495 in 2023 to$ 5,675 in 2024[72]. Operational Efficiency - The integration of direct-to-consumer operations into mainstream operations is expected to generate cost savings and improve efficiency[61]. - The company has implemented a new digital first notice of loss tool and an enhanced payment processing system in 2024 to improve operational efficiency[63]. - The claims department utilizes a predictive model for early identification of claims likely to develop into large losses, ensuring timely resource allocation[59]. - The company actively investigates and pursues fraud, including claimant and provider fraud, to mitigate claims exposure[58]. - The company maintains business continuity and disaster recovery plans to ensure critical functions are restored in case of disruptions[64]. Investment and Reinsurance - The total carrying value of the company's investment portfolio was more than $2.4 billion as of December 31, 2024[93]. - Approximately$ 190.0 million in excess of $10.0 million retention on a per occurrence basis is covered under the current reinsurance program, effective from July 1, 2024 to July 1, 2025[79]. - Estimated remaining liabilities subject to the Loss Portfolio Transfer (LPT) Agreement were approximately$ 277.1 million and $291.7 million as of December 31, 2024 and 2023, respectively[83]. - The LPT Agreement ceded$ 1.5 billion in liabilities for incurred but unpaid losses for consideration of $775.0 million in cash[83]. Distribution and Market Concentration - Specialty agents and distribution partners generated 34.7% of in-force premiums as of December 31, 2024, up from 30.7% in 2022[101]. - ADP, the largest payroll services provider in the U.S., generated 17.2% of in-force premiums as of December 31, 2024, compared to 15.0% in 2022[102]. - Digital agents contributed 7.0% of in-force premiums as of December 31, 2024, an increase from 4.5% in 2022[103]. - The company had approximately 2,500 traditional insurance agencies marketing its products as of December 31, 2024, generating 65.3% of in-force premiums[98]. - The company generated 45% of its in-force premiums from California as of December 31, 2024, indicating a significant concentration in that state[134]. Regulatory and Competitive Environment - The property and casualty insurance industry is cyclical, with current excess underwriting capacity leading to lower rate levels and smaller profit margins[132]. - The company faces intense competition in the workers' compensation insurance market, which could adversely affect its ability to sell policies at adequate rates[129]. - The company is subject to various state insurance assessments, which are accrued as liabilities and recognized as expenses as related premiums are earned[117]. - The company must comply with state insurance regulations, which require prior approval for changes in control and significant transactions involving its subsidiaries[112]. - Regulatory changes could significantly impact the company’s operations, particularly in key states like California, Florida, Nevada, and New York[164]. Risk Management - The company is exposed to risks from acts of terrorism and natural disasters, which could materially affect financial results and operations[159]. - Recent geopolitical uncertainties have indirectly impacted the value of the company’s investment portfolio, with potential future effects[163]. - The company faces credit risk from reinsurers, which could adversely affect financial condition if they fail to pay ceded losses[144]. - The company’s loss and LAE reserves are estimates and may be inadequate, with potential adjustments impacting financial results[153]. - Cybersecurity threats pose significant risks, with potential disruptions to operations and loss of sensitive data impacting reputation and financial condition[186]. - The company maintains insurance for certain liabilities, but coverage may not be adequate for potential losses from disruptions or security breaches[189]. Capital Management - The company maintains a strong equity capital position, having declared$ 150.7 million in dividends and repurchased $149.2 million of its common stock over the past three years[35]. - The company has declared and paid quarterly cash dividends since becoming publicly traded in 2007, with expectations to continue this practice in the future[210]. - The company repurchased a total of 193,857 shares of its common stock during the quarter ended December 31, 2024, at an average price of$ 51.20 per share[211]. - The company has a stock repurchase authorization of up to $100 million, extended through July 31, 2025[211]. - The company may require additional capital in the future, which could be unavailable or only available on unfavorable terms, potentially impacting growth and operations[182]. Workforce and Diversity - The company has improved female representation in leadership roles, with women making up 64% of all employees, 72% of managers, and 71% of the executive team[122]. - The Chief Information Security Officer (CISO) has over 30 years of experience in technology and cybersecurity, enhancing the company's risk management capabilities[202]. - The company relies heavily on key executives and employees for industry expertise and relationships, and losing these individuals could disrupt operations and financial performance[183]. Real Estate and Operations - The company has reduced its real estate footprint by closing and vacating certain offices in California, Missouri, Nevada, North Carolina, and Wisconsin since 2021[202]. - As of February 1, 2025, the company leased a total of 50,152 square feet of office space across four states, including its corporate headquarters in Reno, Nevada[202].