Employers Holdings (EIG) risk factors, FY2024 10-K

Operational and Strategic Risks

1. 01If we fail to price our insurance policies sufficiently, our business competitiveness, financial condition, and results of operations could be materially adversely affected
2. 02Intense competition and the fact that we write only a single line of insurance could adversely affect our ability to sell policies at rates that we deem adequate
3. 03Our concentration in California ties our performance to the business, economic, demographic, natural perils, competitive, legislative and regulatory conditions in that state
4. 04We rely on traditional insurance agents, specialty agents, brokers, and other distribution partners
5. 05We rely on statistical data models and analytics that leverage internal and external data
6. 06At December 31, 2024, we had $417.8 million of reinsurance recoverable for paid and unpaid losses and LAE, of which $6.3 million was due to us on paid claims
7. 07We obtained reinsurance covering the losses incurred prior to July 1, 1995, and we could be liable for some or all of those losses if the coverage provided by the LPT Agreement proves inadequate or we fail to collect from the reinsurers to that agreement

Financial Risks

1. 08We focus on small and mid-sized businesses, and those businesses may be severely and disproportionately impacted by a downturn in economic conditions or changes in applicable regulations, taxes, or labor conditions
2. 09A downgrade in our financial strength rating could reduce the amount of business that we are able to write or result in the termination of certain of our agreements with our strategic partners
3. 10Our liability for losses and LAE is based on estimates and may be inadequate to cover our actual losses and expenses
4. 11We are a holding company with no direct operations. We depend on the ability of our subsidiaries to transfer funds to us to meet our obligations and capital management objectives, and our insurance subsidiaries' ability to pay dividends to us is restricted by law
5. 12Acts of terrorism and natural, or man-made catastrophes or other disruptive events could materially adversely impact our financial condition and results of operations
6. 13Acts of terrorism, natural or man-made catastrophes or other disruptive events, including social unrest, can also affect our business due to resulting temporary or permanent closures of our insured’s businesses, even if there are no claims arising from such event

Regulatory and Legal Risks

1. 14The insurance business is subject to extensive regulation and legislative changes, which impact the manner in which we operate our business
2. 15More generally, insurance regulators have broad regulatory powers designed to protect policyholders and claimants, and not stockholders or other investors
3. 16Legislation and regulation impact our ability to investigate fraud and other abuses of the workers' compensation system in the states in which we do business. Our relationships with medical providers are also impacted by legislation and regulation, including penalties for failure to make timely payments
4. 17Administrative proceedings, legal actions, or judicial decisions involving our insurance subsidiaries could have a material adverse effect on our business, financial condition and results of operations
5. 18Assessments and other surcharges for guaranty funds, second injury funds, and other mandatory pooling arrangements may reduce our profitability
6. 19State insurance laws, certain provisions of our charter documents, and Nevada corporation law could prevent or delay a change in control that could be beneficial to us and our stockholders
7. 20We may be unable to realize our investment objectives, and economic conditions in the financial markets could lead to investment losses
8. 21In 2023 and 2024, despite volatility, market interest rates largely stabilized, and equity markets performed well versus those of 2022. These factors served to meaningfully reduce, but did not eliminate, the unrealized losses that we experienced in 2022
9. 22We may require additional capital in the future, which may not be available to us or may be available only on unfavorable terms
10. 23Our business is largely dependent on the efforts of our executives and other key employees because of their industry and technical expertise, knowledge of our markets, and relationships with the insurance agents, brokers, and other distribution partners that sell our products
11. 24We rely on our information technology and telecommunication systems, including those of third parties that we outsource certain business functions to, and the disruption or failure of these systems, cyber-attacks on these systems, or security breaches or incidents could materially and adversely affect our business
12. 25A failure to effectively maintain, enhance and modernize our information technology systems, effectively develop and deploy innovative technologies, and execute new business initiatives, including those involving artificial intelligence, could adversely affect our business
13. 26We are subject to laws and regulations governing privacy and information security that could adversely affect our business or subject us to liability