Employers Holdings (EIG)

Workers' compensation insurer Employers Holdings (NYSE:EIG) fell short of the market’s revenue expectations in Q4 CY2025, with sales falling 21.3% year on year to $170.5 million. Its non-GAAP profit of $0.66 per share was 32% above analysts’ consensus estimates.

Company Overview

With roots in Nevada and a strong concentration in California where 45% of its premiums are generated, Employers Holdings (NYSE:EIG) is a specialty provider of workers' compensation insurance focused on small and select businesses engaged in low-to-medium hazard industries across the United States.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

Employers Holdings competes with other workers' compensation specialists like Amerisafe (NASDAQ:AMSF) and ICW Group, as well as larger commercial insurers that offer workers' compensation among broader product lines, including The Hartford (NYSE:HIG), Travelers (NYSE:TRV), and Liberty Mutual.

Big picture, insurers generate revenue from three key sources. The first is the core business of underwriting policies. The second source is income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from various sources such as policy administration, annuities, or other value-added services. Unfortunately, Employers Holdings’s 3.8% annualized revenue growth over the last five years was sluggish. This was below our standard for the insurance sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Employers Holdings’s recent performance shows its demand has slowed as its revenue was flat over the last two years. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Employers Holdings missed Wall Street’s estimates and reported a rather uninspiring 21.3% year-on-year revenue decline, generating $170.5 million of revenue.

Net premiums earned made up 87% of the company’s total revenue during the last five years, meaning Employers Holdings barely relies on non-insurance activities to drive its overall growth.

While insurers generate revenue from multiple sources, investors view net premiums earned as the cornerstone - its direct link to core operations stands in sharp contrast to the unpredictability of investment returns and fees.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are:

• Gross premiums - what’s ceded to reinsurers as a risk mitigation and transfer strategy

Employers Holdings’s net premiums earned has grown at a 4.4% annualized rate over the last five years, worse than the broader insurance industry and in line with its total revenue.

When analyzing Employers Holdings’s net premiums earned over the last two years, we can see that growth decelerated to 2.7% annually. Since two-year net premiums earned grew faster than total revenue over this period, it's implied that other line items such as investment income grew at a slower rate. While these additional streams certainly contribute to the bottom line, their impact can vary. Some firms have shown greater success and long-term consistency in investing their float compared to peers. However, sharp fluctuations in the fixed income and equity markets can significantly affect short-term performance.

This quarter, Employers Holdings’s net premiums earned was $188.5 million, flat year on year. But this was still enough to meet Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

The combined ratio sums the costs of underwriting (salaries, commissions, overhead) as well as what an insurer pays out in claims (losses) and divides it by net premiums earned. If a company boasts a combined ratio under 100%, it is underwriting profitably. If above 100%, it is losing money on its core operations of selling insurance policies.

Given the calculation, a lower expense ratio is better. Over the last five years, Employers Holdings’s combined ratio has increased by 22.6 percentage points, going from 96% to 111%. It has also worsened by 15.8 percentage points on a two-year basis, showing its expenses have consistently increased at a faster rate than revenue. This usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Employers Holdings’s combined ratio came in at 106% this quarter, beating analysts’ expectations by 130 basis points (100 basis points = 1 percentage point). This result was 10.6 percentage points worse than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Employers Holdings, its EPS declined by 21.9% annually over the last five years while its revenue grew by 3.8%. We can see the difference stemmed from higher interest expenses or taxes as the company actually improved its combined ratio and repurchased its shares during this time.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Employers Holdings, its two-year annual EPS declines of 51.4% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, Employers Holdings reported adjusted EPS of $0.66, down from $1.15 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Employers Holdings’s full-year EPS of $0.91 to grow 86.8%.

Insurers are balance sheet businesses, collecting premiums upfront and paying out claims over time. Premiums collected but not yet paid out, often referred to as the float, are invested and create an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality because it reflects long-term capital growth and is harder to manipulate than more commonly-used metrics like EPS.

Employers Holdings’s BVPS grew at a sluggish 2% annual clip over the last five years. However, BVPS growth has accelerated recently, growing by 8.4% annually over the last two years from $39.96 to $46.98 per share.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Employers Holdings currently has $35,000 of debt and $955.7 million of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.1×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on equity, or ROE, represents the ultimate measure of an insurer's effectiveness, quantifying how well it transforms shareholder investments into profits. Over the long term, insurance companies with robust ROE metrics typically deliver superior shareholder returns through a balanced approach to capital management.

Over the last five years, Employers Holdings has averaged an ROE of 8.5%, uninspiring for a company operating in a sector where the average shakes out around 12.5%.

It was good to see Employers Holdings beat analysts’ EPS expectations this quarter. On the other hand, its revenue missed and its net premiums earned fell slightly short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock remained flat at $42.58 immediately following the results.

Updated: February 19, 2026 at 11:39 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

We see the value of companies helping consumers, but in the case of Employers Holdings, we’re out. To begin with, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. While its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its worsening combined ratio shows the business has become less productive.

Employers Holdings’s P/B ratio based on the next 12 months is 0.8x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $49 on the company (compared to the current share price of $42.12).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.