Employers (NYSE:EIG) used its fourth-quarter 2025 earnings call to detail steps it is taking to address elevated claim frequency tied to California cumulative trauma (CT) filings, while highlighting capital returns, expense management initiatives, and the rollout of a new excess workers’ compensation product.
California cumulative trauma remains the key underwriting challenge
Chief Executive Officer Kathy Antonello said the elevated frequency of California CT claims remains a California-specific issue, noting that claim frequency in other states and within non-CT claims in California “continues to trend favorably.” Antonello said the company recognized early that the CT environment was creating a hard market in California and responded with rate increases and tightened underwriting restrictions on several classes of business.
In the Q&A, Antonello said the acceleration in CT claim frequency seen in 2024 and early 2025 “slow[ed] down and flatten[ed] quite a bit” during 2025. However, she said CT claims as a percentage of overall claims remain “quite elevated” versus historical levels and she was “not ready to claim victory yet.”
Premium trends and fourth-quarter underwriting results
Chief Financial Officer Mike Pedraja reported gross premiums written of $156.8 million, down from $176.3 million in the prior-year quarter, a decrease of 11%. He attributed the decline primarily to lower new business writings and lower final audit premiums, partially offset by higher renewal business premium.
Antonello later confirmed that in California the premium pressure reflects a combination of lower new business and non-renewals, and that Employers has also selected certain classes of business to exit on a countrywide basis. She said the company expects what it saw in the fourth quarter to continue throughout 2026.
Employers reported losses and loss adjustment expenses (LAE) of $134.4 million, compared with $113.2 million a year ago, an increase of 18.7%. Pedraja said the increase was primarily due to an increase in the accident year 2025 selected loss and LAE ratio and the absence of favorable development in the quarter.
Commission expense rose 5.7% to $25.8 million, driven by non-recurring adjustments, according to Pedraja. Underwriting expenses fell 10% to $39.8 million, which he said was due to expense management efforts including reduced personnel costs and other variable costs such as policyholder dividends and bad debt.
Reserve review and financial strength
Antonello said the company’s standard fourth-quarter full actuarial assessment concluded that no additional reserve strengthening or adjustments to the current accident year loss and LAE ratio were necessary. She also said Employers engaged an independent actuarial firm to assess estimated ultimate loss, and that firm concluded the company’s carried reserves were “well within the range of reasonable estimates.” Antonello said this confirmed actions taken in the third quarter to address workers’ compensation trends.
Antonello also pointed to A.M. Best’s reaffirmation of the insurance company’s financial strength rating of A as evidence of Employers’ positioning in the workers’ compensation market.
Investment portfolio actions lift yield but create realized loss
Net investment income increased to $31.4 million from $26.7 million, up 17.6%, driven mostly by private equity investment return distributions and a higher book yield on the fixed income portfolio, according to Pedraja.
He said the company executed an investment rebalancing aimed at reducing equity investments to target levels and increasing overall portfolio yield. Pedraja noted equity investments had appreciated and reached 16% of the portfolio versus a target allocation of approximately 10%. As part of the repositioning, Employers sold low-yielding fixed income securities to offset associated equity gains and redeployed proceeds into higher-yielding fixed income investments.
Pedraja said the rebalancing increased portfolio yield by a net 40 basis points, extracted an estimated net present value gain of $16 million, and reduced required capital. However, the sale of fixed income investments produced an after-tax realized loss of $40 million, which reduced net income and adjusted book value per share during the quarter. He added that stockholders’ equity and book value per share were not impacted by the rebalancing.
Employers’ fixed maturities ended the quarter with a modified duration of 4.4 and average credit quality of A+, while weighted average book yield increased to 4.9% at quarter end from 4.5% in the prior year, aided by the rebalancing.
Capital returns, AI initiatives, and a new excess workers’ comp product
Management emphasized shareholder returns and operating investments. Antonello said the company delivered $215 million of share repurchases and regular quarterly dividends in 2025 and completed a $125 million recapitalization plan in January that had been announced in the third quarter. She said those actions, along with operational performance, increased book value per share including the deferred gain by 11% to $51.31.
Pedraja said adjusted net income (excluding net realized and unrealized investment gains and losses and the benefit of LPT deferred gain amortization) was $14.5 million for the quarter, compared with $28.7 million last year. During the quarter, Employers repurchased nearly 2.4 million shares at an average price of $40.94 per share, totaling $97 million. He also said the company repurchased an additional 898,594 shares from Jan. 1 through Feb. 18 at an average price of $44.28 per share, with $53.1 million remaining under the repurchase authorization. Pedraja said management views the stock as “meaningfully undervalued” at current levels and that repurchases at these prices generate significant value for continuing shareholders.
Antonello said the board declared a first-quarter 2026 dividend of $0.32 per share, payable March 18 to stockholders of record March 4. She added that $104.1 million was returned to stockholders in the fourth quarter through dividends and repurchases.
Operationally, Antonello highlighted expense ratio progress and AI deployment, saying Employers drove its expense ratio down 180 basis points in 2025 to 21.7% and expects it to continue declining as AI initiatives expand. She described efforts including moving data into Databricks, rolling out Anthropic’s Claude across the organization, using AI code assistance for developers, and deploying AI in “over 40 or 50” claims use cases. She said the company also developed a claims platform enhancement and other capabilities backed by an “agentic ecosystem,” including tools intended to help claims adjusters and premium auditors.
Antonello also discussed Employers’ new excess workers’ compensation product, calling it a strategic expansion that leverages the company’s core workers’ compensation expertise while diversifying its risk profile. She said Employers is accepting submissions and that early market response has been strong. In Q&A, she said the company expects to write its first business effective July 1 and intends to scale cautiously as it learns. She also said the company has other products in mind but was not ready to announce them.
Asked about how the excess product could perform, Antonello said Employers believes the product could perform in the “mid-80s” combined ratio over time, describing excess as more severity-driven than frequency-driven due to higher self-insured retentions. She suggested AI-enabled data ingestion and faster quoting—particularly processing long loss-run histories—could help Employers compete. While noting the company does not give guidance, Antonello said management would “love to see” excess workers’ comp reach about 10% of overall written premium over the next four to seven years.
About Employers (NYSE:EIG)
Employers Holdings, Inc (NYSE: EIG) is a publicly traded property and casualty insurance holding company headquartered in Des Moines, Iowa. Through its subsidiaries, Employers Mutual Casualty Company and Employers Preferred Insurance Company, the firm specializes in providing workers’ compensation coverage alongside an array of commercial insurance products. Its service offerings include general liability, commercial auto, businessowners policies and umbrella coverages, tailored to meet the risk-management needs of small and mid-sized businesses across multiple industries.
The company markets its insurance solutions primarily through a network of independent agencies and brokers, leveraging local market expertise to underwrite policies that address the unique exposures faced by clients in manufacturing, construction, healthcare, retail and service sectors.
