Employers Holdings Drops 5.8% Despite Q2 Earnings Beat

Shares of Employers Holdings, Inc. EIG have declined 5.8% since it reported second-quarter 2024 results on Jul 31, after the closing bell. The better-than-expected earnings were aided by growth in premiums written, policies in force and higher yields on fixed maturity securities. However, the positives were partially offset by increased overall expenses.

EIG reported second-quarter adjusted earnings per share of $1.10, which surpassed the Zacks Consensus Estimate by 1.9%. However, the bottom line fell 6% year over year.

Total revenues grew 0.8% year over year to $217 million. But the top line missed the consensus mark by 3%.

Q2 Key Updates

Gross premiums written of $207.9 million advanced 5% year over year in the quarter under review on the back of new business growth and higher renewal rates, partly offset by decreased final audit premiums. Net premiums written of $206.1 million increased 5% year over year.

Net premiums earned by Employers Holdings amounted to $187.8 million, which improved 6% year over year but lagged the Zacks Consensus Estimate by 4.6%.

Net investment income climbed 0.4% year over year to $26.9 million in the second quarter due to increased yields on fixed-maturity securities. However, the decline in invested balances of fixed-maturity securities partially offset the growth. As such, the metric missed the consensus mark by only 0.1%.

Total expenses of $177 million inched up 3.3% year over year. Losses and loss adjustment expenses recorded a 20% year-over-year rise due to growth in earned premiums and increased current accident year loss and loss adjustment expense ratio. Commission expenses grew 14% year over year.

EIG reported a pre-tax income of $40 million in the quarter under review, which fell 8.7% year over year.

Policies in force were at a record level of 128,522, which increased 3% year over year.

The combined ratio increased 380 basis points (bps) year over year to 94.2% but came lower than the Zacks Consensus Estimate of 95.5%. Underwriting and general and administrative expense ratio improved 400 bps year over year to 22%.

Financial Update (as of Jun 30, 2024)

Employers Holdings exited the second quarter with investments, cash and cash equivalents of $2.47 billion, which fell from the 2023-end level of $2.5 billion.

Total assets of $3.6 billion remained flat from 2023 end.

Total stockholders' equity improved from the 2023-end level of $1.01 billion to $1.02 billion.

Adjusted book value per share was $48.89, which rose from $45.41 a year ago.

Capital Deployment Update

Employers Holdings bought back shares worth $19.2 million in the second quarter. It had a leftover capacity of $44.4 million under its repurchase authorization as of Jul 31, 2024.

Management announced a quarterly dividend of 30 cents for the third quarter, which will be paid on Aug 28, 2024, to shareholders as of Aug 14.

Zacks Rank & Key Picks

EIG currently carries a Zacks Rank #3 (Hold).

Investors interested in the broader Finance space may look at some better-ranked players like Aflac Incorporated AFL, Brown & Brown, Inc. BRO and Marsh & McLennan Companies, Inc. MMC, each carrying a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Aflac's current-year earnings is pegged at $6.73 per share, which indicates 8% year-over-year growth. It witnessed seven upward estimate revisions in the past 30 days against no downward movements. AFL beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 8.2%.

The Zacks Consensus Estimate for Brown & Brown's 2024 earnings indicates 30.6% year-over-year growth. During the past month, BRO has witnessed five upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 9.8%.

The Zacks Consensus Estimate for Marsh & McLennan's current-year earnings suggests a 9.4% year-over-year jump. During the past month, MMC has witnessed seven upward estimate revisions against none in the opposite direction. The consensus mark for current-year revenues indicates 6.7% growth from a year ago.

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