Employers Holdings (EIG -3.10%) may not be a household name, but it's one for investors to watch. The insurance company reported its third-quarter earnings on Oct. 28. In this segment of Backstage Pass, recorded on Nov. 22, Fool contributor Brian Withers covers the highlights of the company's performance during the three-month period.
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Brian Withers: Well, great. Let me jump into mine. Mine isn't as fun, my first one here. Employers Holdings, ticker symbol EIG. These guys do, they're into insurance for work-related incidents. So workers' comp.
That was the word that I was trying to get. They do workers' comp insurance. What's interesting is why they became a wreck was many of the larger companies who have workers' compensation as a component of what they were doing were starting to get out of the business, and Employers Holdings has been profitable for a really long time.
Sorry, not necessarily profitable because you can see. No, their earnings are positive, I'm sorry. But they've been able to be in this business and have a positive expense ratio. This is what they do. They do workers' comp insurance and they're covered over most of the states in the union, except some states.
Actually, their states are served by the state rather than private companies like Employers Holdings. You can see the revenue is $168 million, which was a beat. They missed on the bottom line, earnings came down. They're having a number of COVID-related costs, which I'll show you in a bit. I like how they came out with it and actually shared a good bit of data.
It's a really small company, just over $1 billion market cap. The numbers have been all over the place and I think part of this is due to they've had a number of COVID claims and they are paying some of these out, so it's an unexpected cost across the board.
But the CEO came out, they had a record quarter for gross written premiums up 16%, $252 million, so that's the amount that they collected from the premiums that are in place today. Policies in force, 110,000 policies, up 6%. This is also a record.
The combined ratio, so loss expense ratio is what they collected versus the claims that they paid out, so 63% is pretty nice and then they add all of their other costs on top of that and it comes to 98%. The other thing that's interesting if you're a Warren Buffett fan and you know that part of what they do through their insurance business is they invest the float. Well, these guys have the same thing.
They've got $18 million in investment income in this current quarter, and they have about a $2.7 billion portfolio. They have a really large portfolio for such a small market cap that they are investing in and getting returns from. Let me show you this slide here on COVID. The COVID claims and this was just for 2020, you could see that the net written premium, they took a large dip. It went down about 17% year-over-year and the net earned premium went down as well.
This is related to companies laying off people. When you do workers comp, they're collecting for every employee that you have. But if there's less employees, from the customers, that was the impact. You can see over here, they had almost 6,000 claims as they investigated them. They ended up with about 1,300. Some 300 were accepted and 148 are still open, and they even show you the split out here.
There was one claim that was $867,000. If people have been in the hospital and are on a ventilator for weeks, you can see how that could add up. They've spent about $5.5 million aggregated so far overall, and COVID is somewhat of an unexpected thing, but they are working through this. These numbers aren't my favorite. If I am a person making a claim and they're down to less than half of the claims were actually accepted.
Its potential as people dug into it, they didn't necessarily catch the COVID at work, or however that employers holdings ferreted it out that detail, but they've done pretty well. Regardless of COVID concerns, they have $2.7 billion in the bank that they're making money off of. I think that bodes well for the future for them.
