Reno, Nev.-based Employers Holdings Inc. has reported third quarter 2010 net income of $10.1 million compared with $30.6 million in the third quarter of 2009, a decrease of $20.5 million or $0.42 per diluted share.
Net income for the nine months ended Sept. 30, 2010 was $42.7 million compared to $71.8 millionfor the nine months ended September 30, 2009. For the first nine months of 2010, net income before the impact of the LPT was $29.1 million compared to $58.4 million for the same period in 2009.
Third quarter net premiums written of $81.3 million decreased 1.8 percent compared with the third quarter of 2009. Net premiums earned decreased $17.5 million or 17.9 percent to $80.7 million in the third quarter of 2010.
The company had a third quarter 2010 combined ratio of 111.6 percent (117.5 percent before the LPT), an increase of 22.7 percentage points from the third quarter of 2009 combined ratio of 88.9 percent (93.7 percent before the LPT).
The combined ratio for the nine months ended Sept. 30, 2010 was 106.5 percent (112.2 percent before the LPT), compared with 95.6 percent (99.8 percent before the LPT) for the nine months ended Sept. 30, 2009, an increase of 10.9 percentage points.
Douglas D. Dirks, president and CEO of EHI, commented: “While our current accident year loss estimates remained stable year over year, severity trends in California have increased and we believe the significant benefits from California reform have largely been realized. Consequently, there was no favorable loss development for prior accident years in the third quarter while last year’s third quarter included favorable prior accident year development of $10.4 million. Importantly, this difference led to substantially lower net income and a higher loss ratio in the third quarter of this year compared to the third quarter of last year. On the other hand, as a result of our cost control efforts, our underwriting and other operating expense ratio was 2.4 percentage points lower compared to the prior year’s quarter while the underlying underwriting and other operating expenses were 23.6 percent lower than the third quarter of last year.”
Dirks said he does not see evidence of a sustained economic recovery yet. Net premiums written declined just 1.8 percent year over year, but total payroll exposure declined approximately 15 percent year over year and 11 percent since Dec. 31, 2009, with Florida, Nevada and Wisconsin having the largest percentage declines for those periods among the company’s largest states. He said that as California rate increases worked their way through the company’s book of business, net rate in the state flattened in September. “Barring additional California rate increases or other positive impacts on premium, going forward, we would expect net rate in California to reflect payroll trends in that state,” he said.
“While the economy remains under considerable pressure, we’re driving a set of initiatives that will strengthen our performance and better position us for growth. We have initiatives in place to add new agents and agencies, additional policies and additional premium nationally, with particular emphasis on our acquired states. Specifically, over the next two years, we are targeting the addition of 20,000 policies and over 900 agents,” he said. “Our intent is to expand our pipeline by appointing additional agents in newer jurisdictions where we’re doing business and by deploying our technology into our newer states to make it easier for agents to do business with us. Our roll-out of rapid quote capability to 19 states allows more agents access to a rapid quote system for approximately 65 classes of small business customers with estimated annual premiums of $25,000 or less. We think that by increasing our number of agents and by enhancing their ease of doing business with us, there are opportunities to grow going forward, particularly in our acquired states where we have less market presence. We believe we can produce more business with loss characteristics similar to those we are currently writing.”
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