What’s happening when securities analysts come calling | nnbusinessview.com

What’s happening when securities analysts come calling

John Seelmeyer

“Everyone: Blackberries off,” Ann Nelson instructs executives gathered around a conference table six minutes before Employers Holdings Inc. of Reno is scheduled to open the phone lines for the company’s quarterly conference call with investors.

Everyone double-checks, making small jokes with Nelson, the executive vice president of corporate and public affairs with Employers Holdings.

Five minutes remain.

The nine top executives of the publicly held workers compensation carrier based in Reno take one last look at their scripts. The sun shines brightly through the windows of the third-floor conference room at Employers’ headquarters in South Meadows.

Doug Dirks, the company’s president and chief executive, reminds the conference coordinator at Thomson Reuters how to pronounce the often-mispronounced name of a securities analyst who is likely to participate.

And then it’s time for the 45-minute conference call that allows Employers Holding to tell its story to securities analysts, field their questions and explain the company’s strategic direction.

Along with analysts, the call last Wednesday will draw an audience of investors, financial reporters and Employers’ competitors in the workers compensation sector.

There’s just a whiff of nervous energy in the room, a few feet tapping nervously under the conference table, as the call gets under way.

Vicki Erickson Mills, vice president of investor relations, reads several pages of a disclaimer, most of it legally required boilerplate, and turns the call over to Dirks.

“We are pleased with our performance in the second quarter …” begins Dirks, reading from the script in a three-ring binder in front of him.

The script is fresh from revisions made a couple of hours before the session began to reflect questions that Mills was hearing from analysts since Employers Holdings issued a press release detailing its quarterly earnings the day before the conference call.

And the script has been shaped for a couple of weeks while the company fine-tuned its understanding of its results, developed the press release and briefing materials, and thought through the sorts of questions that analysts likely would be asking.

The Employers team got a good idea of the likely direction of questions early in the morning as analysts began releasing their thoughts about what they had read in the press release the prior evening.

As Dirks continues to read, members of the Employers Holdings management team, Ric Yocke, its chief financial officer, and Lenard Ormsby, its general counsel, follow along in their own copies of the script.

Soon it is Yocke’s turn to read, explaining the financial results in greater detail than Dirks, who had focused largely on strategy and market conditions.

While they speak, Mills is closely watching a large video screen in the conference room that lists the folks who have signed on to listen to the call.

She clicks to the next screen, calling up a list of three analysts who want to ask a question.

Texting back and forth with the conference coordinator at Thomson Reuters, Mills sets the order in which she wants analysts to ask questions. It’s not necessarily first come, first served.

Instead, she relies on her knowledge of the analysts who follow Employers Holdings to orchestrate the questions. She wants analysts who are likely to ask broad questions about market and strategic direction up first. Analysts who are likely to get into financial details will get their chance later.

The first questioner asks Dirks how the company is balancing its growth with its often-stated refusal to cut its rates unrealistically to win new business.

Dirks begins his answer.

From across the room, Ormsby’s eyes are focused, laser-like, on Dirks. A wrong word here, a gratuitous remark there, could bring untold problems from securities regulators. The company’s general counsel won’t miss a word during the question-and-answer period.

The coordinator calls for more questions.

A couple of new names pop up in the on-line queue.

The coordinator of the call knows that some companies don’t want to take questions from callers who might be hedge-fund managers who have shorted the company’s stock and hope to use a question to raise negative reactions.

He asks if Mills want to take questions from the newcomers.

“Yes, we take everyone,” she texts back.

The questioner is fishing for more detailed financial guidance about the company’s future results. Smiles around the table. Dirks deflects the question.

And then it is over.

“Well …” says Dirks, “they asked what we thought they were going to.”

Mills checks her laptop.

“The stock is up 17 cents,” she says.

From down the table, someone asks: Where was it before the conference call?

“Up 7 cents.”

SIDEBAR

Employers’ quarterly earnings story

When executives of Employers Holdings Inc. of Reno discussed the company’s second-quarter earnings during a conference call with analysts last week, this what they had to say:

The company, which writes workers compensation policies, earned $5 million in the second quarter, which compares with earnings of $8.2 million in the comparable quarter a year earlier.

Newly adopted accounting rules, however, peeled $2.2 million from the most recent earnings.

Doug Dirks, the company’s president and chief executive officer, said Employers’ business continues to perk up as the nation’s economy recovers and employers get more workers on their payrolls.

In the past 12 months, he said, Employers has added nearly 20,000 new policies to its books and increase of 38 percent. And the rates that Employers Holdings is able to charge for its policies are rising, too. Its net rate in California, by far its largest market, rose by 14.4 percent in the past year.

The company’s subsidiaries, such as Employers Insurance Company of Nevada, specialize in providing coverage to small businesses, largely in low-risk sectors such as physicians’ offices. It provides coverage in 31 states.

Further improvements in rates is the priority of Employers through the rest of this year, Dirks said, as that’s one of the key elements to increasing the company’s profit margins.

On the other hand, low interest rates meant the company earned only $18.3 million on its investment portfolio during the quarter, down from $20.3 million a year earlier. The yield on the portfolio fell to 3.7 percent, compared with 4.2 percent a year ago.

Employers repurchased 1.1 million shares of its stock during the second quarter, paying an average price of $17.10 a share for a total price of $18.6 million. And it’s paying a quarterly dividend of 6 cents a share on Sept. 4 to shareholders of record on August 21.


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