Employers Holdings (EIG) has seen the conditions around its workers’ compensation business improve with double-digit rate increases and stabilized cost trends, and Amit Kumar, Vice President and Senior Analyst at Macquarie Group Limited, expects significant upside from this insurance company’s stock.
“The biggest draw with [EIG] is workers’ compensation market conditions have improved. They’re getting double-digit rate increases. The loss cost trends have stabilized. If you go back to 2011, that was a time when there was a lot of debate if this line, which is workers’ compensation line — with the performers in this line sort of blow up. Our analysis of the industry shows us that that is not the case,” Kumar said.
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Kumar says recent analysis of this stock confirms his thesis, and he expects the stock to increase in price given the improving conditions this insurer is facing and the increased M&A interest in this segment.
“Recently we did a full industry analysis and walked away with increasing confidence on this line, so in my mind, if you’re looking at the pricing, if you’re looking at the loss cost trends and then you look at where the stock is trading at and our runoff value analysis, you can see that there is a meaningful upside to Employers Insurance Group,” Kumar said.
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