Douglas Dirks doesn't mince any words when he describes the strategies taken by competitors of Reno's Employers Holdings Inc. in the workers compensation insurance market in California.
Dirks, the president and chief executive officer of Employers, calls some of his competitors' pricing "irrational" and says they appear to be sacrificing profitability to buy business.
Just as troubling, Dirks told securities analysts last week that some of Employers' competitors appear to be
specifically targeting the low-risk groups such as restaurants and physicians' offices that are the bread and butter of the Reno company's business in California.
California accounts for more than 70 percent of Employers' business.
In Nevada, where Employers generates about 20 percent of its business, the company is beginning to see the effects of the economic slowdown, Dirks said. As Nevada companies have smaller payrolls, they need less workers compensation coverage.
The upshot of the tough markets: For the fourth quarter, Employers said its revenues totaled $105.4 million compared with $161 million a year earlier. Even though the company peeled more than $10 million from its expenses during the year, net income for the quarter was $31.8 million compared with $55.1 million a year earlier.
Investors, however, bumped the company's stock up by nearly 5 percent after Employers said it plans to repurchase up to $100 million worth of its shares in a program that will run through mid-2009. And the company's board set a dividend payout of 6 cents a share.
The company continues to look for acquisitions, Dirks said.
It's spending $194 million to buy AmCOMP, a Florida workers compensation carrier. That acquisition, which will widen Employers' footprint into 18 states where it doesn't have much a presence, is expected to close during the second quarter.
