NASDAQ:AMSF AMERISAFE Q3 2023 Earnings Report $46.62 -0.02 (-0.04%) As of 01:06 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast AMERISAFE EPS ResultsActual EPS$0.61Consensus EPS $0.64Beat/MissMissed by -$0.03One Year Ago EPSN/AAMERISAFE Revenue ResultsActual Revenue$74.82 millionExpected Revenue$75.00 millionBeat/MissMissed by -$180.00 thousandYoY Revenue GrowthN/AAMERISAFE Announcement DetailsQuarterQ3 2023Date10/25/2023TimeN/AConference Call DateThursday, October 26, 2023Conference Call Time10:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by AMERISAFE Q3 2023 Earnings Call TranscriptProvided by QuartrOctober 26, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Welcome to the AMERISAFE 2023 Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Catherine Shirley. Please go ahead. Speaker 100:00:13Good morning. Welcome to the AMERISAFE This call is being recorded. A replay of today's call will be available. Details on how to access the replay are in the earnings release. During this call, we will be making forward looking statements. Speaker 100:00:38These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Actual results may differ materially from the results expressed or implied in these statements If the underlying assumptions prove to be incorrect or as the result of risks, uncertainties and other factors, including factors discussed in the earnings release, In the comments made during today's call and in the Risk Factors section of our Form 10 ks, Form 10 Qs and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward looking statement. I will now turn the call over to Janelle Frost, Amerisafe's President and CEO. Speaker 200:01:21Thank you, Catherine, and good morning, everyone. During the Q3, momentum in our top line grew with increased in force policy count as well as an increase in audit premium. However, our expense ratio was elevated due to some infrequent items during the quarter, which Andy will provide more detail on. The overall workers' compensation market has remained fairly stable from the last quarter with declining rates partially offset by wage inflation. Our underwriting discipline is demonstrated in our ability to maintain strong margins throughout many market cycles. Speaker 200:01:56In the Q3, we reported a combined ratio of 90.6% and a return on average equity of 11.8%. Our top line increased 3.9% compared with the Q3 of 2022 with voluntary premium for policies written in the quarter Growing 1.1 percent. We continue to see strong retention in policies for which we offer renewal with a 95% retention for the quarter. Moving on to losses, the accident year loss ratio remained steady at 71%. During the quarter, our claims handling practices drove better than expected outcomes resulting in favorable prior year development of $10,200,000 or 15.2 loss ratio points. Speaker 200:02:44These reserves were primarily released from accident years 2019, 2020 2021. As it relates to loss trends, frequency and severity were both in line with our expectations, trending lower when compared with previous year at 9 months. It's been a while since I used the word lumpy in my prepared remarks, but when reporting favorable claims trends before the end of an accident year, I am reminded that there is no seasonality to when severe claims happen. While the market remains challenging, we continue to utilize our focus on high hazard Risk to position the company for outperformance within the industry. High retention with policyholders demonstrating our strong position while we work to attract new business, delivering robust returns to shareholders. Speaker 200:03:33Before returning the call over to Andy, I wanted to discuss our special dividend. The company's Board of Directors declared a special dividend of $3.50 for shareholders of record as of December 1, 2023. This dividend reflects the operational excellence of Amerisafe and our commitment to shareholder value creation through capital deployment and returning excess capital when appropriate. With that, I'll turn the call over to Andy to discuss the financials. Speaker 300:04:00Thank you, Janelle, and good morning to everyone. For the Q3 of 2023, Amerisafe reported net income of $10,000,000 or $0.52 per diluted share And operating net income of $11,700,000 or $0.61 per diluted share. During the Q3 of 2022, net income was 11,400,000 or $0.59 per diluted share and operating net income of $14,100,000 or $0.73 per diluted share. The lower net income was primarily driven by certain items in the quarter driving the expense ratio higher as well as less tax exempt interest income driving A high tax rate compared to the Q3 of 2022. Gross written premiums were $70,800,000 in the quarter versus $68,200,000 in the Q3 of 2022, growing 3.9% on a year over year basis. Speaker 300:04:51Payroll audit and related premium adjustments increased premiums written by $5,600,000 as compared to an increase of $3,400,000 in the Q3 of 2022. While audit premium was strong this quarter, we continue to expect some flattening out in coming periods. Seeded premiums increased $1,600,000 for the quarter compared to the prior year quarter, primarily due to costs related to additional reinsurance coverage. Our total underwriting and other expenses were $22,400,000 in the quarter, a 14% increase compared with the $19,600,000 recognized in prior year quarter. This increase resulted in expense ratio of 33.6% compared with 28.9% in the Q3 of 2022. Speaker 300:05:36The increase was primarily due to a $1,600,000 reduction in reinsurance profit sharing commission due to adverse development from an older treaty, A $600,000 increase in commission expense and $400,000 increase in regulatory assessments and fees. Our tax rate was 19.2% compared to 15.5% for last year's Q3, largely due to a lower proportion of tax exempt income Versus underwriting income in the quarter compared with last year. Turning to our investment portfolio. In the 3rd quarter, net investment income increased 16.1 percent to 8 $100,000 from $7,000,000 in the prior year quarter. The increase was driven by higher yields on cash as well as higher investment rates on fixed maturity securities. Speaker 300:06:22For the quarter, yield on new investments increased approximately 230 basis points, driving our tax equivalent book yield to 3.77 percent or 60 basis points higher than the Q3 of 2022. Realized gains for the portfolio and securities sold were $5,100,000 in the quarter Compared with $600,000 during the Q3 of 2022, primarily related to realized gains on an equity security. The investment portfolio is a high quality carrying AA- credit rating with a duration of 4.3 years. The composition of the portfolio is 56% in municipal bonds, 27% in corporate bonds, 4% in U. S. Speaker 300:07:04Treasuries and agencies, 6% in equity securities and 7% in cash and other investments. Approximately 57% of our bond portfolio is comprised of health and maturity securities And due to the notable increase in rates during the quarter, the net unrealized loss position was $35,100,000 at quarter end. As a reminder, this held to maturity securities are carried at amortized costs and therefore unrealized gains or losses on these securities are not reflected in our book value. Our capital position is strong with a high quality balance sheet, solid loss reserve position and conservative investment portfolio. At quarter end, Amerisafe carried roughly $950,000,000 in investments, cash and cash equivalents. Speaker 300:07:48Our company paid its regular quarterly cash dividend of $0.34 per share in the 3rd quarter. This quarter, the Board declared a quarterly cash dividend of $0.34 per share payable on December 15, 2023 to shareholders of record as of December 1, 2023. And finally, just a couple of other topics. Book value per share was $17.51 an increase of 5.7 percent from year end 2022 and operating return With that, I would like to open the call for the question and answer portion of the call. Operator? Operator00:08:51Our first question today comes from Mark Hughes with Truist. Speaker 400:08:58Thank you. Good morning. Speaker 200:09:00Good morning, Mark. Speaker 400:09:03Did you give the ELCM number, Janelle? Speaker 200:09:08150. Speaker 400:09:14And then, how do you Are you seeing anything happening with medical inflation? There's all this talk about employee benefits expenses going up and healthcare costs. What do you think about that? Speaker 200:09:31It is certainly the topic du jour amongst Everyone in the industry and workers' comp, I think we all believe, I know I believe that Given the cost of health care, that we will indeed see that eventually work its way into the workers' compensation system, But can't point to any data elements at this point other than pockets here and there of anecdotal experiences, Nothing prolific that I would say that we've seen it truly impact the industry. However, I do think It is top of mind for people in the industry and when they're contemplating reserving, I do think people are Companies are probably being a little more cautious or a little more thoughtful about medical costs, expectations in their reserves, depending on how they view that. Amerisafe relies heavily on our case reserves. Our FCMs have always taken a long term approach to medical case Inflation or medical inflation within their individual case reserves, and that has benefited us in our past and we haven't changed that practice. So we are closely monitoring what's happening and really trying to look for pockets of savings as we always are, but particularly when I feel like the medical landscape to some degree has changed. Speaker 400:10:55Yes. The top line ex audit premium and I think we calculated it a little differently than you presented, but this is the 1st positive number since 2018, Q1 2018, if I'm looking at it properly. Not a dramatic change, but is there anything going on that's helping to support the top line here? Speaker 200:11:22Yes. I'll talk there's a couple of things I think happening there. We've reported some policy growth over the last few quarters. So that's been a positive. But certainly, rate decreases have the premium dollars necessarily didn't follow the policy growth. Speaker 200:11:37This quarter, We still had rate declines, no question, but we were able to grow even more policy count growth. And I really attributed that The hard work of the Amerisafe employees trying to make the most of their agent relationships, ease of doing business, Making sure that we're making the right contacts and penetration within the agency. So kudos to them for really And making a difference there, I don't view it as a shift in the marketplace. I think it's more of, efforts Within the Amerisafe 4 walls of moving that needle, at the same time, wage inflation is sort of acting as a rate increase, right? So we've talked about Wage inflation for a number of quarters, if I look back, we were reporting 12%, 10%, 8%. Speaker 200:12:29This quarter it was down to 5.9%, but still higher than the industry the countrywide average in terms of wage inflation. So we're certainly benefiting that both in terms of premium that we're putting on the books now and then, of course, the audit premium as well. We're not seeing New employee counts really shift all that much. So I don't I feel like the economies for our insureds are strong, But not to the point where they're experiencing a labor shortage in terms of being able to add new workers. Speaker 400:13:02Yes. Could you give the number of large claims through 9 months? Speaker 200:13:09We ended the quarter with 8 claims within case incurred over $1,000,000 If you look at that compared to where we were at 9:30 last year, I think that was 11. So still slightly down from where we were last year. Speaker 400:13:23Yes. The Reinsurance treaty where you had the adverse and you had to reverse the profit sharing or reduce profit sharing, What was the circumstance there? Did that impact your own reserves? Clearly, they would have been offset by earnings elsewhere, but What was Speaker 200:13:46that? Right. This is a very good point. Yes, these were older treaties prior to 2017 where there were claims that had some adverse development and it just caused that ceding commission or that profit sharing that was associated with those treaties So reverse, so they've been accrued over a period of time. And that we use the word infrequent. Speaker 200:14:07I really didn't know how to describe it because it's not something that happens very often. But that profit commission was on older reinsurance treaties. But you're absolutely right. Obviously, it didn't impact the net aggregate Development that we experienced in the quarter. It was just particular to those years. Speaker 400:14:25And then I'll ask one more, and I'm being fairly rude. But the 202021 accident years, kind of the COVID years, You're obviously taking gains on those. Any observations about how those have been developing? Speaker 200:14:48That's a great question. I would say that we're not within our expectation. The COVID years I think a little bit different than a lot of the industry expected. Yes, our claim counts were down per se, But yet, we still had severe claims, right? So those claims are developing they're not developing any differently than any other accident year From that standpoint, so I think there was in our at this point, I would just say there was in our expectations for you're talking about 'twenty one and 'twenty two, right, or 2020 2021 either way. Speaker 200:15:23Obviously in 2021 we had the cat claim in the 4th quarter. That hasn't developed any differently than our expectation that we had at the end of that accident year. Speaker 400:15:35Great. Thank you very much. Speaker 200:15:38Thank you, Mark. Operator00:15:53Our next question will come from Matt Carletti with JMP. Speaker 500:15:58Hey, thanks. Good morning. Speaker 200:16:01Good morning, Matt. Speaker 500:16:03Mark covered a lot of ground there, I don't have to understand. Speaker 200:16:06I guess he did. Speaker 400:16:07But he was not being rude. Speaker 500:16:08He was not being rude. Could you just maybe dive in a little deeper on the question you had about growth, and specifically kind of some of the focus on what you're doing at agencies? I mean, I noted you appointed a new Chief Sales Officer this summer. It feels like there's a little more concerted effort Towards making sure maybe every no stone is left unturned within kind of your, of course, your underwriting appetite. Could you just expand on that a little bit? Speaker 200:16:43That's a great way to put it, no stern left unturned. I'll start with this. Our underwriting appetite and our Discipline in risk selection has not changed. So I'll start there. You're absolutely right. Speaker 200:16:58We brought in Our Chief Sales Officer, Ray Wise. And how you phrased it was the way I would phrase it is, I feel like we've elevated the focus within the Company on our agent customers and our agent relationships. We've had head of sales in the past, But they were not at the executive level. So it's really having a person sitting at the table when we're making strategic decisions, focused on that agent customer and what we need to be doing from that standpoint. So I look for Good things to come from that relationship. Speaker 200:17:35At the same time, even like I said before, even within the company, we have Had a concerted effort in trying to change ease of doing business, working with our agent customers, And our employees have really pushed hard on that. And sometimes it takes a while for these things to take root, and I feel like that momentum is starting Speaker 500:18:00Perfect. That makes a lot of sense. Thank you for the color. Speaker 200:18:05Thank you, Matt. Operator00:18:07And our next question comes from Mark Hughes with Truist. Speaker 400:18:13Yes, thanks. Just a couple more. Speaker 200:18:16Mark? Speaker 400:18:18Any commentary on the construction end market that this concept of the next job is very important? How are you seeing that, sweetheart? Speaker 200:18:29Right. My best gauge of that is what's being reported to us in payrolls on a monthly basis. And our construction book, the payrolls have been relatively strong, but they show both wage growth And some new employee count, but not large increases. So from that aspect, it's holding up quite well. I always like to remind people, we report out construction as an aggregate group, but the largest class within that is roofing. Speaker 200:18:59Roofing risk is something that we think we really are experts at. And roofing is not always necessarily new construction. There's a maintenance component to that, which I think we benefit from. So even if there is A lag or downturn in commercial construction, I feel like that holds up pretty well, pretty resilient. Speaker 400:19:24And then what are your thoughts on capital, Another nice special dividend, I think. Where is that going to position you? I guess, you've got, At this point, no debt, if I'm looking at it properly. Speaker 200:19:46Correct. Speaker 400:19:46So kind of your underwriting leverage, If you did lever up with debt, how much more capacity could you add? Speaker 200:19:58Yes. I'll say this about the special dividend. And you're so right about thinking about it in terms of leverage. Amerisafe has been profitable from an underwriting standpoint has been profitable for a very long time and that has enabled us to build excess Capital. And then when those rates started declining and the market really started softening, the question was to the and I think the question Board was asking itself is what do we do with this capital? Speaker 200:20:27Do we invest it in writing unprofitable business? Do we protect our margin? Obviously, our decision was to protect the margin. And so that in turn led to us declaring special dividends to return that capital to shareholders. At this point, we're starting to see some growth, which is great. Speaker 200:20:48The decision was to return capital to the shareholders. But we've said this all along and I'll repeat it is, as we are able to grow organically and put that capital to work to grow organically To generate the returns that our shareholders are accustomed to, I would expect there may be some change to that. But as of right now, we're seeing momentum, but we're not there yet, Right. We're not there yet. And then of course, there's always the possibility of a merger and acquisition. Speaker 200:21:16You mentioned we have no debt on the balance sheet. So there's that's another use Capital, if we were to go out and buy something. And we have a share repurchase program as well. We haven't purchased any shares recently, but there's still roughly a little over $12,000,000 left in that share repurchase program. Speaker 400:21:37Appreciate that. And then loss cost trends, I don't know If you put that in the release or made a comment, but very curious what you're saying out of the NCCI? Speaker 200:21:50Yes. I think for NCCI's latest number for 2023 or going into 2024 is somewhere around averaging around 7.5%. The loss costs that were effective that became effective this quarter for AMERISAFE averaged around 5%. So Still rate declines or still loss cost declines, but maybe a slowing in that decline. But if I'm being completely candid, there's nothing on a macro basis that I see in the industry either in data that were reported or just what other CEOs are sharing that it's going to move that needle anytime in the near future in terms of approved loss costs. Speaker 200:22:46I appreciate that. Okay. Speaker 400:22:49All right. Appreciate it. Thanks, Janelle. Thanks, Andy. Speaker 200:22:52Thank you. Speaker 300:22:53Thank you. Operator00:22:55Thank you. And that does conclude the question and answer session. I'll now turn the conference back over to Janelle Frost for any additional or closing remarks. Speaker 200:23:05We are pleased with the quarter's results, particularly when driven by the fundamentals we focus on, disciplined underwriting, proactive safety and extensive claims management. Thank you for joining us today. Operator00:23:20Well, thank you. And that does conclude today's conference. We do thank you for your participation and have an excellent day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAMERISAFE Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) AMERISAFE Earnings HeadlinesAMERISAFE's (AMSF) "Market Outperform" Rating Reaffirmed at JMP SecuritiesMay 3 at 2:45 AM | americanbankingnews.comAMERISAFE reports Q1 2025 premium growth of 4.6% amid competitive marketMay 1, 2025 | msn.comBuffett’s favorite chart just hit 209% – here’s what that means for goldA Historic Gold Announcement Is About to Rock Wall Street For months, sharp-eyed analysts have watched the quiet buildup behind the scenes. Now, in just days, the floodgates are set to open. The greatest investor of all time is about to validate what Garrett Goggin has been saying for months: Gold is entering a once-in-a-generation mania. Front-running Buffett has never been more urgent — and four tiny miners could be your ticket to 100X gains.May 5, 2025 | Golden Portfolio (Ad)AMERISAFE Inc (AMSF) Q1 2025 Earnings Call Highlights: Navigating Challenges with Strategic GrowthMay 1, 2025 | gurufocus.comAMERISAFE’s Earnings Call: Balancing Growth and ChallengesApril 30, 2025 | tipranks.comAMERISAFE's (NASDAQ:AMSF) investors will be pleased with their 16% return over the last five yearsApril 12, 2025 | finance.yahoo.comSee More AMERISAFE Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like AMERISAFE? Sign up for Earnings360's daily newsletter to receive timely earnings updates on AMERISAFE and other key companies, straight to your email. Email Address About AMERISAFEAMERISAFE (NASDAQ:AMSF), an insurance holding company, underwrites workers' compensation insurance in the United States. The company provides benefits to injured employees for temporary or permanent disability, death, and medical and hospital expenses. It sells its products through retail and wholesale brokers and agents; and small and mid-sized employers engaged in hazardous industries, including construction, trucking, logging and lumber, agriculture, manufacturing, telecommunications, and maritime. AMERISAFE, Inc. was incorporated in 1985 and is based in DeRidder, Louisiana.View AMERISAFE ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback Plan Upcoming Earnings American Electric Power (5/6/2025)Advanced Micro Devices (5/6/2025)Marriott International (5/6/2025)Constellation Energy (5/6/2025)Arista Networks (5/6/2025)Brookfield Asset Management (5/6/2025)Duke Energy (5/6/2025)Energy Transfer (5/6/2025)Mplx (5/6/2025)Ferrari (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 6 speakers on the call. Operator00:00:00Welcome to the AMERISAFE 2023 Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Catherine Shirley. Please go ahead. Speaker 100:00:13Good morning. Welcome to the AMERISAFE This call is being recorded. A replay of today's call will be available. Details on how to access the replay are in the earnings release. During this call, we will be making forward looking statements. Speaker 100:00:38These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Actual results may differ materially from the results expressed or implied in these statements If the underlying assumptions prove to be incorrect or as the result of risks, uncertainties and other factors, including factors discussed in the earnings release, In the comments made during today's call and in the Risk Factors section of our Form 10 ks, Form 10 Qs and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward looking statement. I will now turn the call over to Janelle Frost, Amerisafe's President and CEO. Speaker 200:01:21Thank you, Catherine, and good morning, everyone. During the Q3, momentum in our top line grew with increased in force policy count as well as an increase in audit premium. However, our expense ratio was elevated due to some infrequent items during the quarter, which Andy will provide more detail on. The overall workers' compensation market has remained fairly stable from the last quarter with declining rates partially offset by wage inflation. Our underwriting discipline is demonstrated in our ability to maintain strong margins throughout many market cycles. Speaker 200:01:56In the Q3, we reported a combined ratio of 90.6% and a return on average equity of 11.8%. Our top line increased 3.9% compared with the Q3 of 2022 with voluntary premium for policies written in the quarter Growing 1.1 percent. We continue to see strong retention in policies for which we offer renewal with a 95% retention for the quarter. Moving on to losses, the accident year loss ratio remained steady at 71%. During the quarter, our claims handling practices drove better than expected outcomes resulting in favorable prior year development of $10,200,000 or 15.2 loss ratio points. Speaker 200:02:44These reserves were primarily released from accident years 2019, 2020 2021. As it relates to loss trends, frequency and severity were both in line with our expectations, trending lower when compared with previous year at 9 months. It's been a while since I used the word lumpy in my prepared remarks, but when reporting favorable claims trends before the end of an accident year, I am reminded that there is no seasonality to when severe claims happen. While the market remains challenging, we continue to utilize our focus on high hazard Risk to position the company for outperformance within the industry. High retention with policyholders demonstrating our strong position while we work to attract new business, delivering robust returns to shareholders. Speaker 200:03:33Before returning the call over to Andy, I wanted to discuss our special dividend. The company's Board of Directors declared a special dividend of $3.50 for shareholders of record as of December 1, 2023. This dividend reflects the operational excellence of Amerisafe and our commitment to shareholder value creation through capital deployment and returning excess capital when appropriate. With that, I'll turn the call over to Andy to discuss the financials. Speaker 300:04:00Thank you, Janelle, and good morning to everyone. For the Q3 of 2023, Amerisafe reported net income of $10,000,000 or $0.52 per diluted share And operating net income of $11,700,000 or $0.61 per diluted share. During the Q3 of 2022, net income was 11,400,000 or $0.59 per diluted share and operating net income of $14,100,000 or $0.73 per diluted share. The lower net income was primarily driven by certain items in the quarter driving the expense ratio higher as well as less tax exempt interest income driving A high tax rate compared to the Q3 of 2022. Gross written premiums were $70,800,000 in the quarter versus $68,200,000 in the Q3 of 2022, growing 3.9% on a year over year basis. Speaker 300:04:51Payroll audit and related premium adjustments increased premiums written by $5,600,000 as compared to an increase of $3,400,000 in the Q3 of 2022. While audit premium was strong this quarter, we continue to expect some flattening out in coming periods. Seeded premiums increased $1,600,000 for the quarter compared to the prior year quarter, primarily due to costs related to additional reinsurance coverage. Our total underwriting and other expenses were $22,400,000 in the quarter, a 14% increase compared with the $19,600,000 recognized in prior year quarter. This increase resulted in expense ratio of 33.6% compared with 28.9% in the Q3 of 2022. Speaker 300:05:36The increase was primarily due to a $1,600,000 reduction in reinsurance profit sharing commission due to adverse development from an older treaty, A $600,000 increase in commission expense and $400,000 increase in regulatory assessments and fees. Our tax rate was 19.2% compared to 15.5% for last year's Q3, largely due to a lower proportion of tax exempt income Versus underwriting income in the quarter compared with last year. Turning to our investment portfolio. In the 3rd quarter, net investment income increased 16.1 percent to 8 $100,000 from $7,000,000 in the prior year quarter. The increase was driven by higher yields on cash as well as higher investment rates on fixed maturity securities. Speaker 300:06:22For the quarter, yield on new investments increased approximately 230 basis points, driving our tax equivalent book yield to 3.77 percent or 60 basis points higher than the Q3 of 2022. Realized gains for the portfolio and securities sold were $5,100,000 in the quarter Compared with $600,000 during the Q3 of 2022, primarily related to realized gains on an equity security. The investment portfolio is a high quality carrying AA- credit rating with a duration of 4.3 years. The composition of the portfolio is 56% in municipal bonds, 27% in corporate bonds, 4% in U. S. Speaker 300:07:04Treasuries and agencies, 6% in equity securities and 7% in cash and other investments. Approximately 57% of our bond portfolio is comprised of health and maturity securities And due to the notable increase in rates during the quarter, the net unrealized loss position was $35,100,000 at quarter end. As a reminder, this held to maturity securities are carried at amortized costs and therefore unrealized gains or losses on these securities are not reflected in our book value. Our capital position is strong with a high quality balance sheet, solid loss reserve position and conservative investment portfolio. At quarter end, Amerisafe carried roughly $950,000,000 in investments, cash and cash equivalents. Speaker 300:07:48Our company paid its regular quarterly cash dividend of $0.34 per share in the 3rd quarter. This quarter, the Board declared a quarterly cash dividend of $0.34 per share payable on December 15, 2023 to shareholders of record as of December 1, 2023. And finally, just a couple of other topics. Book value per share was $17.51 an increase of 5.7 percent from year end 2022 and operating return With that, I would like to open the call for the question and answer portion of the call. Operator? Operator00:08:51Our first question today comes from Mark Hughes with Truist. Speaker 400:08:58Thank you. Good morning. Speaker 200:09:00Good morning, Mark. Speaker 400:09:03Did you give the ELCM number, Janelle? Speaker 200:09:08150. Speaker 400:09:14And then, how do you Are you seeing anything happening with medical inflation? There's all this talk about employee benefits expenses going up and healthcare costs. What do you think about that? Speaker 200:09:31It is certainly the topic du jour amongst Everyone in the industry and workers' comp, I think we all believe, I know I believe that Given the cost of health care, that we will indeed see that eventually work its way into the workers' compensation system, But can't point to any data elements at this point other than pockets here and there of anecdotal experiences, Nothing prolific that I would say that we've seen it truly impact the industry. However, I do think It is top of mind for people in the industry and when they're contemplating reserving, I do think people are Companies are probably being a little more cautious or a little more thoughtful about medical costs, expectations in their reserves, depending on how they view that. Amerisafe relies heavily on our case reserves. Our FCMs have always taken a long term approach to medical case Inflation or medical inflation within their individual case reserves, and that has benefited us in our past and we haven't changed that practice. So we are closely monitoring what's happening and really trying to look for pockets of savings as we always are, but particularly when I feel like the medical landscape to some degree has changed. Speaker 400:10:55Yes. The top line ex audit premium and I think we calculated it a little differently than you presented, but this is the 1st positive number since 2018, Q1 2018, if I'm looking at it properly. Not a dramatic change, but is there anything going on that's helping to support the top line here? Speaker 200:11:22Yes. I'll talk there's a couple of things I think happening there. We've reported some policy growth over the last few quarters. So that's been a positive. But certainly, rate decreases have the premium dollars necessarily didn't follow the policy growth. Speaker 200:11:37This quarter, We still had rate declines, no question, but we were able to grow even more policy count growth. And I really attributed that The hard work of the Amerisafe employees trying to make the most of their agent relationships, ease of doing business, Making sure that we're making the right contacts and penetration within the agency. So kudos to them for really And making a difference there, I don't view it as a shift in the marketplace. I think it's more of, efforts Within the Amerisafe 4 walls of moving that needle, at the same time, wage inflation is sort of acting as a rate increase, right? So we've talked about Wage inflation for a number of quarters, if I look back, we were reporting 12%, 10%, 8%. Speaker 200:12:29This quarter it was down to 5.9%, but still higher than the industry the countrywide average in terms of wage inflation. So we're certainly benefiting that both in terms of premium that we're putting on the books now and then, of course, the audit premium as well. We're not seeing New employee counts really shift all that much. So I don't I feel like the economies for our insureds are strong, But not to the point where they're experiencing a labor shortage in terms of being able to add new workers. Speaker 400:13:02Yes. Could you give the number of large claims through 9 months? Speaker 200:13:09We ended the quarter with 8 claims within case incurred over $1,000,000 If you look at that compared to where we were at 9:30 last year, I think that was 11. So still slightly down from where we were last year. Speaker 400:13:23Yes. The Reinsurance treaty where you had the adverse and you had to reverse the profit sharing or reduce profit sharing, What was the circumstance there? Did that impact your own reserves? Clearly, they would have been offset by earnings elsewhere, but What was Speaker 200:13:46that? Right. This is a very good point. Yes, these were older treaties prior to 2017 where there were claims that had some adverse development and it just caused that ceding commission or that profit sharing that was associated with those treaties So reverse, so they've been accrued over a period of time. And that we use the word infrequent. Speaker 200:14:07I really didn't know how to describe it because it's not something that happens very often. But that profit commission was on older reinsurance treaties. But you're absolutely right. Obviously, it didn't impact the net aggregate Development that we experienced in the quarter. It was just particular to those years. Speaker 400:14:25And then I'll ask one more, and I'm being fairly rude. But the 202021 accident years, kind of the COVID years, You're obviously taking gains on those. Any observations about how those have been developing? Speaker 200:14:48That's a great question. I would say that we're not within our expectation. The COVID years I think a little bit different than a lot of the industry expected. Yes, our claim counts were down per se, But yet, we still had severe claims, right? So those claims are developing they're not developing any differently than any other accident year From that standpoint, so I think there was in our at this point, I would just say there was in our expectations for you're talking about 'twenty one and 'twenty two, right, or 2020 2021 either way. Speaker 200:15:23Obviously in 2021 we had the cat claim in the 4th quarter. That hasn't developed any differently than our expectation that we had at the end of that accident year. Speaker 400:15:35Great. Thank you very much. Speaker 200:15:38Thank you, Mark. Operator00:15:53Our next question will come from Matt Carletti with JMP. Speaker 500:15:58Hey, thanks. Good morning. Speaker 200:16:01Good morning, Matt. Speaker 500:16:03Mark covered a lot of ground there, I don't have to understand. Speaker 200:16:06I guess he did. Speaker 400:16:07But he was not being rude. Speaker 500:16:08He was not being rude. Could you just maybe dive in a little deeper on the question you had about growth, and specifically kind of some of the focus on what you're doing at agencies? I mean, I noted you appointed a new Chief Sales Officer this summer. It feels like there's a little more concerted effort Towards making sure maybe every no stone is left unturned within kind of your, of course, your underwriting appetite. Could you just expand on that a little bit? Speaker 200:16:43That's a great way to put it, no stern left unturned. I'll start with this. Our underwriting appetite and our Discipline in risk selection has not changed. So I'll start there. You're absolutely right. Speaker 200:16:58We brought in Our Chief Sales Officer, Ray Wise. And how you phrased it was the way I would phrase it is, I feel like we've elevated the focus within the Company on our agent customers and our agent relationships. We've had head of sales in the past, But they were not at the executive level. So it's really having a person sitting at the table when we're making strategic decisions, focused on that agent customer and what we need to be doing from that standpoint. So I look for Good things to come from that relationship. Speaker 200:17:35At the same time, even like I said before, even within the company, we have Had a concerted effort in trying to change ease of doing business, working with our agent customers, And our employees have really pushed hard on that. And sometimes it takes a while for these things to take root, and I feel like that momentum is starting Speaker 500:18:00Perfect. That makes a lot of sense. Thank you for the color. Speaker 200:18:05Thank you, Matt. Operator00:18:07And our next question comes from Mark Hughes with Truist. Speaker 400:18:13Yes, thanks. Just a couple more. Speaker 200:18:16Mark? Speaker 400:18:18Any commentary on the construction end market that this concept of the next job is very important? How are you seeing that, sweetheart? Speaker 200:18:29Right. My best gauge of that is what's being reported to us in payrolls on a monthly basis. And our construction book, the payrolls have been relatively strong, but they show both wage growth And some new employee count, but not large increases. So from that aspect, it's holding up quite well. I always like to remind people, we report out construction as an aggregate group, but the largest class within that is roofing. Speaker 200:18:59Roofing risk is something that we think we really are experts at. And roofing is not always necessarily new construction. There's a maintenance component to that, which I think we benefit from. So even if there is A lag or downturn in commercial construction, I feel like that holds up pretty well, pretty resilient. Speaker 400:19:24And then what are your thoughts on capital, Another nice special dividend, I think. Where is that going to position you? I guess, you've got, At this point, no debt, if I'm looking at it properly. Speaker 200:19:46Correct. Speaker 400:19:46So kind of your underwriting leverage, If you did lever up with debt, how much more capacity could you add? Speaker 200:19:58Yes. I'll say this about the special dividend. And you're so right about thinking about it in terms of leverage. Amerisafe has been profitable from an underwriting standpoint has been profitable for a very long time and that has enabled us to build excess Capital. And then when those rates started declining and the market really started softening, the question was to the and I think the question Board was asking itself is what do we do with this capital? Speaker 200:20:27Do we invest it in writing unprofitable business? Do we protect our margin? Obviously, our decision was to protect the margin. And so that in turn led to us declaring special dividends to return that capital to shareholders. At this point, we're starting to see some growth, which is great. Speaker 200:20:48The decision was to return capital to the shareholders. But we've said this all along and I'll repeat it is, as we are able to grow organically and put that capital to work to grow organically To generate the returns that our shareholders are accustomed to, I would expect there may be some change to that. But as of right now, we're seeing momentum, but we're not there yet, Right. We're not there yet. And then of course, there's always the possibility of a merger and acquisition. Speaker 200:21:16You mentioned we have no debt on the balance sheet. So there's that's another use Capital, if we were to go out and buy something. And we have a share repurchase program as well. We haven't purchased any shares recently, but there's still roughly a little over $12,000,000 left in that share repurchase program. Speaker 400:21:37Appreciate that. And then loss cost trends, I don't know If you put that in the release or made a comment, but very curious what you're saying out of the NCCI? Speaker 200:21:50Yes. I think for NCCI's latest number for 2023 or going into 2024 is somewhere around averaging around 7.5%. The loss costs that were effective that became effective this quarter for AMERISAFE averaged around 5%. So Still rate declines or still loss cost declines, but maybe a slowing in that decline. But if I'm being completely candid, there's nothing on a macro basis that I see in the industry either in data that were reported or just what other CEOs are sharing that it's going to move that needle anytime in the near future in terms of approved loss costs. Speaker 200:22:46I appreciate that. Okay. Speaker 400:22:49All right. Appreciate it. Thanks, Janelle. Thanks, Andy. Speaker 200:22:52Thank you. Speaker 300:22:53Thank you. Operator00:22:55Thank you. And that does conclude the question and answer session. I'll now turn the conference back over to Janelle Frost for any additional or closing remarks. Speaker 200:23:05We are pleased with the quarter's results, particularly when driven by the fundamentals we focus on, disciplined underwriting, proactive safety and extensive claims management. Thank you for joining us today. Operator00:23:20Well, thank you. And that does conclude today's conference. We do thank you for your participation and have an excellent day.Read morePowered by