Employers downsizing Reno office
EMPLOYERS hosted its Q2’23 earnings call on Jul 27, 2023. Select Highlights:
- Saw a 59% revenue increase compared to last year, thanks to higher premiums, good investment outcomes, and a boost in investment income.
- Written and earned premiums grew by 10% and 7%.
- Factors like wage growth, a robust job market, new sales strategy, and underwriting model all contributed to this success.
- Reached a record in terms of policies, with over 125,000 active ones.
- Net investment income rose by 34% because of higher market rates and more investments in fixed securities. Made $27 million in this area alone, a record for Employers.
- Overall income also saw a boost from $11 million in investment gains, especially compared to the $50 million loss last year.
- From the perspective of underwriting, had $20 million in favorable developments from past year reserves.
- Combined ratio was an impressive 92%.
- Terminated the lease associated with former corporate headquarters in Reno, Nevada.
- Exit from Reno will result in annual savings of around $3 million. They intend to relocate to a much smaller facility in Reno by December of this year. This new space will be approximately 1/10th the size and cost of the previous location. Therefore, starting in December, they anticipate yearly savings ranging from $2.5 million to $2.7 million due to this real estate change.
- Gross premiums written rose 11% to $198 million from $179 million last year, mainly because of more new and renewal business and higher final audit premiums. Net premiums earned grew by 7% to $177 million from $165 million. Losses and related expenses dropped to $91 million from $93 million due to favorable adjustments from our midyear reserve study.
- Cerity segment had a pretax loss of $2 million for the quarter versus a loss of $3 million a year ago.
- The unemployment rate currently stands at around 3.6%. This is very favorable for workers’ compensation. Employers expressed optimism for the upcoming quarters, especially regarding the potential for audit pickup.
- In the business sectors they operate in, Employers find the environment competitive, particularly for the smallest policy sizes. They have found more success with policies slightly larger than their average of $5,200, attributing this success to their new sales and underwriting model.
- Cerity is making steady progress. By the end of the second quarter, their premium had surged by 166% year-over-year, reaching $7.2 million. This growth is credited to their appetite expansion initiative and Cerity’s improved backing capabilities. They continue to see an uptick in policy flows and have garnered significant interest from firms wanting to collaborate, such as the recent partnership they announced with Simply Business.
- They believe the primary focus for Cerity currently is to integrate its back-end capabilities with Employers. This integration aims to reduce the expense ratio for Cerity in the upcoming year. In retrospect, they had concerns about potential channel conflicts. However, they’ve realized that these conflicts were not as significant as initially thought, suggesting that they could have started this integration process earlier.
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