Price competition stiffening for workers comp company

Employers Holdings Inc. may face an uphill battle this year as it seeks to replicate its strong results from 2006.

The Reno-based workers compensation carrier earned $171.6 million on revenues of $520.3 million in 2006. That compared with net of $137.6 million on revenues of $496.5 million a year earlier.

But price competition is stiffening in California, Employers' biggest market, and the company's executives say they doubt they can sell enough additional policies to make up the difference.

And they say the company's basic strategy careful analysis of the risks it's undertaking when it writes a policy isn't going to change even with continued pricing pressure.

The company went public this year with a common stock issue that's traded on the New York Stock Exchange.

As it reported its results for 2006, Employers said that it collected $393 million in premiums for the year, down from $438.3 million a year earlier.

The difference was largely because of rate decreases in California, where workers compensation reform legislation and growing competition among carriers combined to push prices downward.

That trend is likely to continue this year.

But Douglas Dirks, the president and chief executive officer of Employers, said the company won't chase bad business just to keep the premium dollars flowing.

"California continues to be a profitable market for us," he said, noting that Employers keeps its underwriting standards high to ensure that the new policies it writes for small businesses its only market make financial sense.

The company is the seventh-largest non-governmental workers comp carrier in California.

Employers is expanding into other states, with the Illinois, Florida and Oklahoma markets likely to be opened this year, Dirks said.

Nevada accounted for slightly more than 19 percent of Employers' business last year. Rates in the state are likely to trend upward this year, Employers' executives said.

Although the company collected fewer premium dollars from customers in 2006, it boosted its income from the investment of those dollars.

Its investment income for the year rose 25.3 percent to $68.2 million in 2006 compared with $54.4 million a year earlier. A key factor, executives said, was a fourth-quarter reallocation of the company's portfolio into fixed-income securities from equities.

At the end of the year, the company's investment portfolio totaled $1.7 million.

Those investment earnings helped offset some of the costs involved with taking Employers public. The company said it spent $10 million in the conversion from a mutual company into a public-stock company.


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