Employers (US:EIG)2019-04-29 02:54Financial Data and Key Metrics Changes - The company reported a 10.4% annualized return on adjusted equity and more than doubled its net income, with adjusted income growing by 5.5% [6][7] - Book value per share increased by 6.6%, and the combined ratio before the impact of the loss portfolio transfer (LPT) was 91.9% [7][10] - The first quarter loss and LAE ratio before the impact of the LPT was 52.1%, which is 3.4 percentage points lower than the previous year [10] Business Line Data and Key Metrics Changes - Net written premiums for the quarter were $209 million, down $1.4 million or 0.7% from the first quarter of 2018, primarily due to a reduction in final audit premium [14] - New business-bound policies increased by 19.1% year-over-year, but new business premium decreased by $800,000 or 1.3% over the prior quarter [15] - Renewal premium growth was 9.3% or $12 million, with policy unit retention rates increasing from 93% to 95.2% year-over-year [16] Market Data and Key Metrics Changes - The average renewal rate declined by 11.6%, compared to a 9.5% decline in the same period a year ago, indicating competitive pressures in the middle market business [7][8] - The company experienced a 22% increase in payroll exposure year-over-year, despite a 3.4% decrease in average in-force policy size [17] Company Strategy and Development Direction - The company is focusing on digital solutions based on data, analytics, and technology to create a sustainable competitive advantage [18] - The strategy around small low hazard accounts is aimed at less competition and higher persistency, which continues to be effective [18] Management's Comments on Operating Environment and Future Outlook - Management noted that the underlying loss environment for workers' compensation remains attractive, supporting continued growth [9] - There is an expectation that the declining loss cost trends may be moderating, particularly in California, which could impact pricing strategies [32][33] Other Important Information - The company repurchased $27.4 million of common stock during the quarter, with an additional $10.4 million repurchased since quarter-end [13] - The Board of Directors increased the share repurchase authorization by $50 million, bringing the remaining authority to $57.5 million [13] Q&A Session Summary Question: Momentum in submissions and quotes - Management indicated that the trend of increasing submissions and quotes has continued into the first quarter, with expectations for further impact from ongoing initiatives [20] Question: Loss pick and mix - Management acknowledged that loss trends are rising faster than premiums in certain areas, but this is not consistent across the country [21] Question: Share repurchase sustainability - Management expressed optimism about the sustainability of share repurchases, noting that they are now in a position to be opportunistic [22][24] Question: Progress on Cerity - Early observations on Cerity have been positive, with expectations for rapid growth dependent on regulatory approvals [25][26] Question: Technology initiatives and expense ratio - Management confirmed that the expense ratio is expected to remain about 4 points higher than last year, consistent throughout the year [28][29] Question: Pricing outlook - Management noted that while loss costs are still declining, there may be signs of moderation, particularly in California, which could affect pricing strategies [31][32] Question: Reserve releases - The reserve releases were predominantly from accident years 2014 through 2017 [34] Question: Partner reacquisition update - Management remains optimistic about receiving clearance for the partner reacquisition soon [35]