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Employers (EIG) - 2024 Q2 - Earnings Call Transcript
EIGEmployers (EIG)2024-08-03 13:33
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Financial Data and Key Metrics Changes - The adjusted net income per share for Q2 2024 was 1.10,markingthehighestquarterlyresultinthelast10years[4]−Grosswrittenpremiumsincreasedby101.10, marking the highest quarterly result in the last 10 years [4] - Gross written premiums increased by 10% for the quarter, with all major distribution channels contributing to the growth [5] - The combined ratio was 95.4%, excluding the LPT, and the current accident year combined ratio was 100.2%, the lowest since Q4 2018 [5][6] - Net investment income was 27 million for the quarter, a slight increase year-over-year, primarily due to higher yields on fixed maturity investments [7][8] - The book value per share increased by 14% to 44.91,andtheadjustedbookvaluepershareincreasedbymorethan1044.91, and the adjusted book value per share increased by more than 10% to 48.89 [10] Business Line Data and Key Metrics Changes - New business premiums increased by 9%, and renewal business premiums increased by 10%, partially offset by lower final audit premium recognition [4] - Endorsement premiums were strong, with 13millionrecognized,and13 million recognized, and 3 million in noncompliant premium [18] - Approximately 41millionofpremiumthisquartercamefromappetiteexpansionefforts,performingatafavorablelossratio[18]MarketDataandKeyMetricsChanges−Theannualchangeinemploymentandhourlywagesforleisureandhospitalitywas641 million of premium this quarter came from appetite expansion efforts, performing at a favorable loss ratio [18] Market Data and Key Metrics Changes - The annual change in employment and hourly wages for leisure and hospitality was 6% as of June, down from 10.5% a year ago, impacting audit pick-ups [15][17] - Audit pick-ups decreased to 4.9 million this quarter from 7.7millioninQ22023,contributingtoadecreaseinauditaccrual[17]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonmaintainingstronggrowthinwrittenpremiumsandmanagingexpenseseffectivelythroughintegrationplans[6][10]−Thecompanyintendstocontinueexpandingintonewclassesastheenvironmentremainsfavorable[30]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceintheeffectivenessofmedicalcostcontainmentmeasuresincontrollingmedicalinflation[14]−Thecompetitiveenvironmentremainsstable,withaverageratedecreasesof37.7 million in Q2 2023, contributing to a decrease in audit accrual [17] Company Strategy and Development Direction - The company is focused on maintaining strong growth in written premiums and managing expenses effectively through integration plans [6][10] - The company intends to continue expanding into new classes as the environment remains favorable [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the effectiveness of medical cost containment measures in controlling medical inflation [14] - The competitive environment remains stable, with average rate decreases of 3% to 4% year-over-year in the renewal book [22] - Management noted that the decrease in audit pick-ups was not surprising given the underlying economic conditions [17] Other Important Information - The company repurchased 19 million of common stock at an average price of 41.53pershareduringthequarter[9]−Aregularquarterlydividendof41.53 per share during the quarter [9] - A regular quarterly dividend of 0.30 per share was declared, payable on August 28 [9] Q&A Session Summary Question: Does the workers' comp reimbursement in California follow Medicare fee schedules? - Yes, California medical fee schedules are tied to Medicare, with some adjustments [12] Question: Is the risk of future medical inflation limited due to fee schedules? - The industry has implemented successful medical cost containment measures, which help control medical costs [14] Question: What is the outlook for top line growth considering audit premiums? - The company is pleased with top line growth, although audit pick-ups have slowed, impacting overall growth [15][17] Question: What is the right run rate for expenses? - Expenses can vary based on several factors, but the current expense level is not considered unusual [19][20] Question: How is the competition in the workers' comp sector? - The competitive environment remains stable, with average rate decreases observed in the renewal book [22] Question: How does the ADP book perform compared to the non-ADP book? - The ADP book continues to perform favorably, with no significant changes noted [28]