NASDAQ:AMSF AMERISAFE Q2 2024 Earnings Report $46.64 +0.81 (+1.77%) Closing price 05/2/2025 04:00 PM EasternExtended Trading$46.64 +0.01 (+0.01%) As of 06:13 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast AMERISAFE EPS ResultsActual EPS$0.58Consensus EPS $0.61Beat/MissMissed by -$0.03One Year Ago EPS$0.73AMERISAFE Revenue ResultsActual Revenue$75.83 millionExpected Revenue$74.20 millionBeat/MissBeat by +$1.63 millionYoY Revenue GrowthN/AAMERISAFE Announcement DetailsQuarterQ2 2024Date7/29/2024TimeAfter Market ClosesConference Call DateTuesday, July 30, 2024Conference Call Time10:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by AMERISAFE Q2 2024 Earnings Call TranscriptProvided by QuartrJuly 30, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Good day, and welcome to the AMERISAFE 2024 Second Quarter Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Catherine Shirley, Chief Administrative Officer. Please go ahead. Speaker 100:00:18Good morning. Welcome to the AMERISAFE 20 24 Second Quarter Investor Call. If you have not received the earnings release, it is available on our website atamerisafe.com. This call is being recorded. A replay of today's call will be available. Speaker 100:00:34Details on how to access the replay are in the earnings release. During this call, we will be making forward looking statements. These 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 a 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 statements. Speaker 100:01:20I will now turn the call over to Janelle Frost, Amerisafe's President and CEO. Speaker 200:01:26Thank you, Catherine, and good morning, everyone. The state of the workers' compensation market remains profitable despite continued rate softening. The industry wide data published by NCCI in May was similar to what we've seen over the last few years, an accident year combined ratio below 100 and redundant reserves driving approved loss cost declines. These conditions translate to a competitive marketplace, one in which Amerisafe's disciplined underwriting is critical to long term profitability. For several quarters, we have discussed our investment in profitable growth through greater agent engagement and pipeline efficiency. Speaker 200:02:05These actions drove year over year gross premiums written growth of 6.6% in the quarter. We saw policy count growth in the quarter and we continue to see strong retention for policies for which we offer renewal with 93.3% retention. Audit premiums supported by wage inflation was also a boost to top line. Turning to losses, our accident year loss ratio was in line with the prior year at 71%. Loss cost trends remain in line with previous quarters. Speaker 200:02:37We continue to monitor medical inflation. However, medical fee schedules are in general containing costs. The company experienced $8,100,000 in favorable development on prior accident years, primarily from accident years 2020, 2021 and 2022. We attribute our favorable development to lower claims severities and proactive claims handling. Despite challenging market conditions, Amerisafe's focus on providing protection to small to midsize businesses and caring for their workers has a track record of strong retention and delivering robust returns to shareholders throughout the cycle. Speaker 200:03:17With that, I'll turn the call over to Andy to discuss the financials. Speaker 300:03:20Thank you, Janelle, and good morning to everyone. For the Q2 of 2024, Amerisafe reported net income of $11,000,000 or $0.57 per diluted share and operating net income of $11,100,000 or $0.58 per diluted share. During the Q2 of 2023, net income was $15,600,000 or $0.81 per diluted share and operating net income was $14,000,000 or $0.73 per diluted share. Gross written premiums were $76,400,000 in the quarter compared with $71,700,000 in the Q2 of 2023. The increase in the top line was driven by a combination of increased sales efforts with agents, which drove increased new business and strong retentions. Speaker 300:04:06Audit premiums increased the top line by $7,300,000 compared with $4,800,000 in the Q2 of 2023. Our total underwriting and other expenses were $20,400,000 in the quarter compared with $20,000,000 in the Q2 of 2023, resulting in an expense ratio of 29.8 percent compared with 30.4% in the prior year. We continue to invest in our business, leveraging Amerisafe's disciplined approach to take advantage of attractive market opportunities. For the quarter, our tax rate was 20% compared to 20.1% in the prior year. Turning to our investment portfolio. Speaker 300:04:43In the 2nd quarter, net investment income decreased 3.6% to 7,400,000 the prior year. On a consecutive quarter basis, net investment income increased 1.1% for Q2 of 2024 versus Q1 of 2024. For the quarter, the yield on new investments increased approximately 165 basis points in relation to roll off, driving our tax equivalent book yield to 3.79 percent or 17 basis points higher than the Q2 of 2023. The investment portfolio is a high quality carrying an average AA- credit rating with a duration of 3.9 years. The composition of the portfolio is 58% of municipal bonds, 28% in corporate bonds, 3% in U. Speaker 300:05:30S. Treasuries and agencies, 6% in equity securities and 5% in cash and other investments. Approximately 57% of our bond portfolio is comprised of health and maturity securities. As a reminder, these health 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. Speaker 300:06:00At quarter end, Amerisafe carried roughly $884,000,000 in investments, cash and cash equivalents. Company's Board of Directors declared a regular quarterly cash dividend of $0.37 per share on Friday, July 26, 2024 to shareholders of record of September 6, 2024. And finally, a couple of other topics. Book value per share was $15.78 and operating return on average equity was 14.4%. Our statutory surplus was $280,600,000 atquarterend, up 10.1% from 254 $900,000 at December 31, 2023. Speaker 300:06:40And finally, today, July 30, 2024, we will be filing our Form 10 Q with the SEC after market close. With that, I would like to open the call for the question and answer portion of the call. Operator? Thank Operator00:07:23And our first question is coming from Matt Carletti with Citizens JMP. Speaker 400:07:30Hey, good morning, Janelle. Good morning, Andy. Speaker 200:07:33Good morning, Matt. Speaker 400:07:36I guess my first question, I was hoping, Janelle, maybe you could expand a little bit on the growth in the quarter. I know you've made a comment in your opening comments about some of the recent efforts and investments you've made in kind of agency relationships. I'm hoping maybe you can just give a little more color. I mean noted it was the voluntary grew nicely. The press release referenced TIF growth. Speaker 400:08:00Just kind of how you feel about the sustainability of that as we move forward or kind of the ability to build that going forward? Speaker 200:08:09Certainly, Matt. This is our 4th quarter, I want to say, of either slight growth in voluntary debt premium or relatively flat. So that's something that we have made a concerted effort on and with our employees and with our agents and just trying to make the pipeline more efficient in terms of ease of doing business and building on those agent relationships. So I do feel like we're gaining some momentum there through our employee efforts. It's really not a change in Amerisafe's approach to the business at all. Speaker 200:08:41It's really just about creating efficiencies and valuing those relationships. So I feel pretty good about the growth. You're absolutely right. We've had voluntary debt growth of 2.7% in the quarter. We've grown policy count, I believe, for the last 5 quarters. Speaker 200:08:58So those are all signs there are pointing to the efforts that we're putting in place are generating business growth for us. Speaker 400:09:08Wonderful. And then, just a couple of numbers questions, if I could. One is, what was the ELCM in the quarter? Speaker 200:09:16148. Speaker 400:09:19148. Okay. And then on audit premium, do you have handy what Q3 of 2023 audit premium was just to get an idea of kind of the potential comparison this quarter? Speaker 200:09:34Exactly. 3rd quarter last year was $5,600,000 Speaker 100:09:402nd quarter was 4.8 Wonderful. Speaker 400:09:44All right. Thank you so much. Speaker 200:09:46You're welcome. Operator00:09:50Our next question is coming from Mark Hughes with Truist. Your line is open. Speaker 500:09:55Good morning, Janelle. Good morning, Andy. Speaker 200:09:58Good morning, Mark. Speaker 500:10:00Janelle, if I heard you properly, it sounds like the 148, I think that's up year over year, which I think you had a flat result in 3Q, but then that's the first positive number still scrolling, still scrolling. Speaker 600:10:17Yes. Quite a while. Speaker 200:10:19Yes. That's right, Mark. I mean, when I think of when we report the ELCM, I have to remind myself and like to remind others that really that's really an index over the underlying loss costs. So, as we all know, the underlying loss costs, the approved rates coming out of the states continue to decline. Because we individually underwrite every account, we have to make sure that we are doing so profitably. Speaker 200:10:45And so as we were just like every other carrier right now, we're battling the fact that rates continue to soften. The results for the industry, while below 100, if you look at accident year combined ratios, for the industry as a whole, each year there is some deterioration there. So I just feel like we are reaching that point where we have to be very protective of that. Speaker 500:11:12Right. Yes. Any details on the approved loss costs? Obviously, they're down. Any trend of new state data in the quarter that's worth noting? Speaker 200:11:30No. The overall approved loss cost is somewhere around 8% 9% decrease for the year for the 2024 filings. So I think that's pretty much on course with what NCCI was predicting. Again, because at this point, the industry is even on an accident year basis, the industry is below 100% combined. Speaker 500:11:57Yes. The You talked about medical inflation that the structures or the fee schedules continue to restrain that. Is that ever going to separate? I mean, is there ever any reason to think that's not going to just keep a lid on it and you'll continue to benefit from kind of the government rate suppression, one might say? Speaker 200:12:26Mark, I believe that's actually where we're going to see pressure. For the most part, fee schedules have been doing their job in terms of containing costs. But I do believe there are pressure, particularly in certain types of services, there is pressure, from the provider side of what they're being reimbursed for workers' compensation. And when I talk about we're keeping our eye on medical inflation, that's actually what I'm referring to the fact that at some point, the rubber hits the road in terms of what providers, whether it's hospitals, physicians, surgeons, whatever the case may be, are being reimbursed for workers' compensation and what fits within their own operating models. There will be, in my opinion, in my humble opinion, there will continue to be pressure there. Speaker 500:13:18Yes. Does the uptick in the ELCM, does that reflect a little less competition? I know you're being disciplined around. Speaker 200:13:27I wish. No, it does not reflect less competition. It is still a very competitive marketplace. Speaker 500:13:38Yes. And then anything on the large claims, how have they trended through the 6 months? Speaker 200:13:44Yes. Through the 6 months, we are at 4 claims over $1,000,000 So that's again, I have to every time I throw out that number, I have to caution that that is lumpy. I never know what quarters are going to happen. It is or is not going to happen. But at this point, we haven't had a frequency of severity in terms of $1,000,000 claims. Speaker 500:14:07Yes. And then on reserve development, you guys are still performing tremendously, but no deed going unpunished. It was down a little bit from an even more stellar performance in recent quarters. Anything you would say as to why just sort of from a very simplistic perspective, that was a little bit lower this quarter compared to the last couple of years? Speaker 200:14:42Yes. I like how you phrase that. Reserve development at least for Amerisave reserve development is not linear, right. I often talk about the favorable case that we have or the favorable development that we recognize is truly coming from individual cases. I can't predict when though which quarters those are or not going to happen. Speaker 200:15:05It's hard for me to, bulk at $8,000,000 of favorable development, even though to your point, it is less than the $10,900,000 that we had in the Q2 of last year. I still consider that to be a very healthy number. I can certainly assure you from Amerisafe standpoint, our reserving philosophy has not changed. And I do feel like my claims adjusters because of their practices and the way they reserve claims and the way they intimately know their claims are truly reflecting in our reserves what we believe is most likely outcome and have their for lack of a term, their finger on the pulse of what's happening in terms of survivability and procedures and the assumed inflation that goes into that. So I believe that's built into my case reserves. Speaker 200:16:02So that when we find the opportunities to help an injured worker move on and return to work and have their medical care taken care of, we find those opportunities. And for us at least, that has resulted in favorable development. I don't see that. That pattern, that philosophy has not changed. Speaker 500:16:26Understood. And then how about the construction in market, the question about the next job, we've talked about many times over the years, but how does that stand today? Speaker 200:16:41Our insurance are working, hence why we're having this favorable audit premium. We are still experiencing wage inflation within our industry groups. For the quarter, wage inflation was around 6%, 5%, almost all of that really came from increased wages, less so from new employees. So and that's been very consistent. So the fact that we're not seeing a large influx of new employees doesn't really surprise me given that we insure small to mid sized employers. Speaker 200:17:15But they're obviously working and wages are and payroll insured payrolls are going up. So I think that speaks positively for our industry groups. Speaker 500:17:26Great. Thank you very much. Speaker 200:17:29Thank you, Mark. Operator00:17:38Our next question is coming from Gregory Peters with Raymond James. Speaker 700:17:43Good morning, everyone. Speaker 100:17:45Good morning, Greg. Good morning. Speaker 700:17:48Just I was looking at the 6 month result on the expense ratio versus last year and it's up a little bit, say, 90 basis points. Just curious if there's anything structural that's going on driving that expense ratio higher? Speaker 300:18:05Greg, how are you? The growth that you're seeing in the expenses for the 6 months is really just further investing in the sales side, underwriting, just the front of the house. But again, based on the fact that expenses are never linear either, the investment is probably more upfront now in these 1st 6 months and then it should level off and then we assume to be back in what the range is for us for an annual expense ratio. Speaker 700:18:42Okay. And then just pivoting back to the growth comment. Janelle, I thought you said in the comment on the call, EU policy count growth has been positive for the last 5 consecutive quarters. I don't want to misquote you. But has it been concentrated with certain distribution partners or certain geographies? Speaker 700:19:05Or maybe you can give us some color where the growth is coming from? Speaker 200:19:10Yes, great question. And the answer is no, it's not coming from a particular distribution network. As you know, we use independent agents. That hasn't changed. Actually, if you look at our agent counts, they're probably slightly down. Speaker 200:19:25And that's really because, as I mentioned earlier, we're really working on pipeline efficiency, making sure that we're doing business with the right agents and the agents that we can serve best. So that's been a very positive thing for us. The policy growth has really been I'm going to attribute this to what I just mentioned, which is just the pipeline efficiency, trying to make things a little bit more efficient for our agents in terms of ease of doing business, the time we turn around quotes, making sure that we're giving we are making the most of the opportunities that we have. And because of those things and the efforts of our employees, we have been able to grow policy count. But it's not to your point about industry groups or states, it's not particular to an industry group, it's not particular to a certain type or particular agency distribution. Speaker 200:20:19Nothing and then I guess it goes back to what I was saying earlier in the call. It's not I wouldn't say it's nothing it's anything new that AMERISAFE is doing. It's really just being better as the way we're handling our agency relationships. Speaker 700:20:35And I'm going to come at the severity question again. I know you were addressing it in your previous answers, but on some of the other conference calls, the concept the fact that Florida has raised its reimbursement schedules, Medicare reimbursement schedules beginning next year. That's come up in a couple other calls. And so, I'm just curious as we look forward what you think about how are you measuring out or gauging what your outlook is on severity? Speaker 200:21:11Right. That's yes. So Florida is certainly top of mind for everyone because they've made adjustments to both physician charges and surgical procedures and that seems to be the 2 that everyone's talking about. Because when you look at the percentages increases, you think, wow, that's pretty significant. I believe a couple of things about that. Speaker 200:21:32Those are the kinds of things that I mentioned when I was talking earlier about medical inflation and things we're keeping our eyes on. That's exactly the kinds of things that we're talking about. Now when you look at those large percentages, one of the things that you do have to keep in mind is that we do have networks within each state that work on containing costs as well. So even it's not dollar for dollar in terms of, oh, the reimbursement rate gone up from 100% 110% to 175% for physician services. We also have to keep in mind that we have other cost savings mechanisms on top of that within our provider networks and those type of things. Speaker 200:22:14So it's not dollar for dollar. So that's one caveat. The second thing I'll say is, I think one of the beauties of Amerisafe and how we think about severity and case reserving, using this Florida example Florida as an example, I think really speaks to how our model works so efficiently. Because my claims adjusters are experts in their field and they are wholly focused on the workers' compensation reserve because we're a non aligned carrier. A, they're very attuned to what's happening in terms of their individual states and reflecting that in our initial reserves really, really quickly. Speaker 200:22:56So we're not it's not playing out over a long period time in terms of AMERISAFE loss experience. We're building that into our case our initial case reserves whenever that accident happens. That's important to us in terms of the severity and our recognition in the loss ratio. But keep in mind, it also helps us in terms of our pricing because then when we are underwriting a Florida account, we're taking all of that into account as to our real loss cost live, and reflecting that in our individual rate. That was a very long answer to your severity question. Speaker 700:23:36Excellent. Well, thank you both for the detailed answers. Speaker 200:23:39You're welcome. Operator00:23:45And our final question is coming from Bob Farnam with Janney. Your line is open. Speaker 600:23:50Hi there. Good morning. I've got more of a philosophical question. I'm thinking of the loss cost and they keep going down. And I'm wondering what is it going to take or what's the market conditions going to look like to have the loss cost bottom out? Speaker 600:24:08And how much of a lag will there be for the actual filings to catch up with the actual need to start raising rates? Speaker 200:24:17Yes. Great question. So what's it going to take? As I mentioned earlier, that AXA year combined ratio for the industry continuing to tick up and eventually break 100, that will help at least, I believe, slow the bleeding in terms of the rate decreases, because then accident years will not be considered profitable. To your point about these changes and using again, using Florida as an example, typically what happens when there's a major change going on, and I'll use Florida as an example since the NCCI state. Speaker 200:24:52NCCI will take those costs like if and try to figure out what's that actually going to cost the industry. And even if it's off cycle from a normal rate filing, because each state has their own rate filing dates, they can make like a law only filing. So in other words, something changed in the law that needs to be reflected in the rate and that should theoretically happen. But what happens immediately is when a carrier is aware of it, they start trying to reflect that in their pricing. So hence in their ELCM. Speaker 200:25:25So forget if the underlying loss cost, let's use, let's say an example, Florida that wouldn't change anything at all, then I would assume carriers within their Florida within Florida would try to within their own pricing, of course, Florida is an administrative price phase, it's a little tricky. But through their own competitive methods, let me just use it that way, try to make sure that they're building that into their premium dollars, the fact that they're going to be paying out more on the loss cost side. I believe that pressure will continue and we're going to see more and more examples that, which hopefully will slow the rate of decline or even flatten out the declines in approved loss costs, because I think those pressures are going to continue to happen. For the very reason I was speaking of earlier, physicians have an operating model for which they have a profit margin that they're trying to achieve. And if they're getting reimbursed by workers' compensation for something less than that, there's going to be either a shortage of providers. Speaker 200:26:28In other words, they're going to say, you know what, I don't want your workers' compensation patients or there's going to have to be some adjustment to the pricing. Speaker 600:26:37Right. So I mean, it sounds like, yes, despite the fact that loss costs are going down, the fact that even just this quarter, for example, your ELCM increased, it's kind of taking away some of that loss cost pressure just because you are getting more rate there. Is there a happy point with your retention that you'd be willing to go to if you keep raising rates and customers choose to go elsewhere? Speaker 200:27:10That's a really great way to look at it. If I try to rephrase that, how low would I let my we if you think about loss ratios or loss experience, we if you think about loss ratios or loss experience, typically you have better loss ratios and better loss experience on a renewal account than you would on a new account because you know the account. And then the Amerisafe case, not only do we know the account really well, we've been providing safety services to that account. So we know what their attitude towards safety is. So retention is extremely important to us. Speaker 200:27:48Do we test the market or do we think about when we do know, hey, we have to write underwrite something at a profitable level and that's going to affect our retention. Yes, we pay attention, but I will say underwriting profit above all other things. Speaker 600:28:05Right. And I'm not saying you should start raising your rates significantly. I don't want to start dragging adverse selection in there as well. So it's just something to I was just curious as you hopefully start to tweak your ELCM up, I just want to make sure your retention stays where it is. Speaker 200:28:24Absolutely. And the other thing I'll say this about rates, I haven't I don't think I've really talked about it on this call, Bob. One of the things we have to consider is the fact that wage inflation has been really strong for over a year now and it's starting to wane a little bit, but it's still 6% is nothing to bulk at. And that in some ways has effectively acted as rate for lack of a better term, right? If you have the same employees, but they're making higher wages and that's the basis of premium. Speaker 200:28:55It sort of helped bridge the gap a little bit in terms of the approved loss cost declines. Speaker 600:29:02All right, right. Okay. Thanks for all the color. Speaker 200:29:06Thank you. Operator00:29:10There are no further questions at this time. I will now turn the conference over to Janelle Frost, CEO for any additional or closing remarks. Speaker 200:29:21I'd like to highlight Amerisafe's inclusion in the Ward's 50 top performing property and casualty for the 16th consecutive year. This recognition underlies our employees' ability to use their expertise in high hazard workers' compensation niche to produce financial strength and stability for the company's stakeholders. Congratulations to the AMERISAFE team and thank you for joining us today.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAMERISAFE Q2 202400:00 / 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.comHere’s How to Claim Your Stake in Elon’s Private Company, xAIEven though xAI is a private company, tech legend and angel investor Jeff Brown found a way for everyday folks like you… To partner with Elon on what he believes will be the biggest AI project of the century… Starting with as little as $500.May 5, 2025 | Brownstone Research (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. 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There are 8 speakers on the call. Operator00:00:00Good day, and welcome to the AMERISAFE 2024 Second Quarter Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Catherine Shirley, Chief Administrative Officer. Please go ahead. Speaker 100:00:18Good morning. Welcome to the AMERISAFE 20 24 Second Quarter Investor Call. If you have not received the earnings release, it is available on our website atamerisafe.com. This call is being recorded. A replay of today's call will be available. Speaker 100:00:34Details on how to access the replay are in the earnings release. During this call, we will be making forward looking statements. These 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 a 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 statements. Speaker 100:01:20I will now turn the call over to Janelle Frost, Amerisafe's President and CEO. Speaker 200:01:26Thank you, Catherine, and good morning, everyone. The state of the workers' compensation market remains profitable despite continued rate softening. The industry wide data published by NCCI in May was similar to what we've seen over the last few years, an accident year combined ratio below 100 and redundant reserves driving approved loss cost declines. These conditions translate to a competitive marketplace, one in which Amerisafe's disciplined underwriting is critical to long term profitability. For several quarters, we have discussed our investment in profitable growth through greater agent engagement and pipeline efficiency. Speaker 200:02:05These actions drove year over year gross premiums written growth of 6.6% in the quarter. We saw policy count growth in the quarter and we continue to see strong retention for policies for which we offer renewal with 93.3% retention. Audit premiums supported by wage inflation was also a boost to top line. Turning to losses, our accident year loss ratio was in line with the prior year at 71%. Loss cost trends remain in line with previous quarters. Speaker 200:02:37We continue to monitor medical inflation. However, medical fee schedules are in general containing costs. The company experienced $8,100,000 in favorable development on prior accident years, primarily from accident years 2020, 2021 and 2022. We attribute our favorable development to lower claims severities and proactive claims handling. Despite challenging market conditions, Amerisafe's focus on providing protection to small to midsize businesses and caring for their workers has a track record of strong retention and delivering robust returns to shareholders throughout the cycle. Speaker 200:03:17With that, I'll turn the call over to Andy to discuss the financials. Speaker 300:03:20Thank you, Janelle, and good morning to everyone. For the Q2 of 2024, Amerisafe reported net income of $11,000,000 or $0.57 per diluted share and operating net income of $11,100,000 or $0.58 per diluted share. During the Q2 of 2023, net income was $15,600,000 or $0.81 per diluted share and operating net income was $14,000,000 or $0.73 per diluted share. Gross written premiums were $76,400,000 in the quarter compared with $71,700,000 in the Q2 of 2023. The increase in the top line was driven by a combination of increased sales efforts with agents, which drove increased new business and strong retentions. Speaker 300:04:06Audit premiums increased the top line by $7,300,000 compared with $4,800,000 in the Q2 of 2023. Our total underwriting and other expenses were $20,400,000 in the quarter compared with $20,000,000 in the Q2 of 2023, resulting in an expense ratio of 29.8 percent compared with 30.4% in the prior year. We continue to invest in our business, leveraging Amerisafe's disciplined approach to take advantage of attractive market opportunities. For the quarter, our tax rate was 20% compared to 20.1% in the prior year. Turning to our investment portfolio. Speaker 300:04:43In the 2nd quarter, net investment income decreased 3.6% to 7,400,000 the prior year. On a consecutive quarter basis, net investment income increased 1.1% for Q2 of 2024 versus Q1 of 2024. For the quarter, the yield on new investments increased approximately 165 basis points in relation to roll off, driving our tax equivalent book yield to 3.79 percent or 17 basis points higher than the Q2 of 2023. The investment portfolio is a high quality carrying an average AA- credit rating with a duration of 3.9 years. The composition of the portfolio is 58% of municipal bonds, 28% in corporate bonds, 3% in U. Speaker 300:05:30S. Treasuries and agencies, 6% in equity securities and 5% in cash and other investments. Approximately 57% of our bond portfolio is comprised of health and maturity securities. As a reminder, these health 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. Speaker 300:06:00At quarter end, Amerisafe carried roughly $884,000,000 in investments, cash and cash equivalents. Company's Board of Directors declared a regular quarterly cash dividend of $0.37 per share on Friday, July 26, 2024 to shareholders of record of September 6, 2024. And finally, a couple of other topics. Book value per share was $15.78 and operating return on average equity was 14.4%. Our statutory surplus was $280,600,000 atquarterend, up 10.1% from 254 $900,000 at December 31, 2023. Speaker 300:06:40And finally, today, July 30, 2024, we will be filing our Form 10 Q with the SEC after market close. With that, I would like to open the call for the question and answer portion of the call. Operator? Thank Operator00:07:23And our first question is coming from Matt Carletti with Citizens JMP. Speaker 400:07:30Hey, good morning, Janelle. Good morning, Andy. Speaker 200:07:33Good morning, Matt. Speaker 400:07:36I guess my first question, I was hoping, Janelle, maybe you could expand a little bit on the growth in the quarter. I know you've made a comment in your opening comments about some of the recent efforts and investments you've made in kind of agency relationships. I'm hoping maybe you can just give a little more color. I mean noted it was the voluntary grew nicely. The press release referenced TIF growth. Speaker 400:08:00Just kind of how you feel about the sustainability of that as we move forward or kind of the ability to build that going forward? Speaker 200:08:09Certainly, Matt. This is our 4th quarter, I want to say, of either slight growth in voluntary debt premium or relatively flat. So that's something that we have made a concerted effort on and with our employees and with our agents and just trying to make the pipeline more efficient in terms of ease of doing business and building on those agent relationships. So I do feel like we're gaining some momentum there through our employee efforts. It's really not a change in Amerisafe's approach to the business at all. Speaker 200:08:41It's really just about creating efficiencies and valuing those relationships. So I feel pretty good about the growth. You're absolutely right. We've had voluntary debt growth of 2.7% in the quarter. We've grown policy count, I believe, for the last 5 quarters. Speaker 200:08:58So those are all signs there are pointing to the efforts that we're putting in place are generating business growth for us. Speaker 400:09:08Wonderful. And then, just a couple of numbers questions, if I could. One is, what was the ELCM in the quarter? Speaker 200:09:16148. Speaker 400:09:19148. Okay. And then on audit premium, do you have handy what Q3 of 2023 audit premium was just to get an idea of kind of the potential comparison this quarter? Speaker 200:09:34Exactly. 3rd quarter last year was $5,600,000 Speaker 100:09:402nd quarter was 4.8 Wonderful. Speaker 400:09:44All right. Thank you so much. Speaker 200:09:46You're welcome. Operator00:09:50Our next question is coming from Mark Hughes with Truist. Your line is open. Speaker 500:09:55Good morning, Janelle. Good morning, Andy. Speaker 200:09:58Good morning, Mark. Speaker 500:10:00Janelle, if I heard you properly, it sounds like the 148, I think that's up year over year, which I think you had a flat result in 3Q, but then that's the first positive number still scrolling, still scrolling. Speaker 600:10:17Yes. Quite a while. Speaker 200:10:19Yes. That's right, Mark. I mean, when I think of when we report the ELCM, I have to remind myself and like to remind others that really that's really an index over the underlying loss costs. So, as we all know, the underlying loss costs, the approved rates coming out of the states continue to decline. Because we individually underwrite every account, we have to make sure that we are doing so profitably. Speaker 200:10:45And so as we were just like every other carrier right now, we're battling the fact that rates continue to soften. The results for the industry, while below 100, if you look at accident year combined ratios, for the industry as a whole, each year there is some deterioration there. So I just feel like we are reaching that point where we have to be very protective of that. Speaker 500:11:12Right. Yes. Any details on the approved loss costs? Obviously, they're down. Any trend of new state data in the quarter that's worth noting? Speaker 200:11:30No. The overall approved loss cost is somewhere around 8% 9% decrease for the year for the 2024 filings. So I think that's pretty much on course with what NCCI was predicting. Again, because at this point, the industry is even on an accident year basis, the industry is below 100% combined. Speaker 500:11:57Yes. The You talked about medical inflation that the structures or the fee schedules continue to restrain that. Is that ever going to separate? I mean, is there ever any reason to think that's not going to just keep a lid on it and you'll continue to benefit from kind of the government rate suppression, one might say? Speaker 200:12:26Mark, I believe that's actually where we're going to see pressure. For the most part, fee schedules have been doing their job in terms of containing costs. But I do believe there are pressure, particularly in certain types of services, there is pressure, from the provider side of what they're being reimbursed for workers' compensation. And when I talk about we're keeping our eye on medical inflation, that's actually what I'm referring to the fact that at some point, the rubber hits the road in terms of what providers, whether it's hospitals, physicians, surgeons, whatever the case may be, are being reimbursed for workers' compensation and what fits within their own operating models. There will be, in my opinion, in my humble opinion, there will continue to be pressure there. Speaker 500:13:18Yes. Does the uptick in the ELCM, does that reflect a little less competition? I know you're being disciplined around. Speaker 200:13:27I wish. No, it does not reflect less competition. It is still a very competitive marketplace. Speaker 500:13:38Yes. And then anything on the large claims, how have they trended through the 6 months? Speaker 200:13:44Yes. Through the 6 months, we are at 4 claims over $1,000,000 So that's again, I have to every time I throw out that number, I have to caution that that is lumpy. I never know what quarters are going to happen. It is or is not going to happen. But at this point, we haven't had a frequency of severity in terms of $1,000,000 claims. Speaker 500:14:07Yes. And then on reserve development, you guys are still performing tremendously, but no deed going unpunished. It was down a little bit from an even more stellar performance in recent quarters. Anything you would say as to why just sort of from a very simplistic perspective, that was a little bit lower this quarter compared to the last couple of years? Speaker 200:14:42Yes. I like how you phrase that. Reserve development at least for Amerisave reserve development is not linear, right. I often talk about the favorable case that we have or the favorable development that we recognize is truly coming from individual cases. I can't predict when though which quarters those are or not going to happen. Speaker 200:15:05It's hard for me to, bulk at $8,000,000 of favorable development, even though to your point, it is less than the $10,900,000 that we had in the Q2 of last year. I still consider that to be a very healthy number. I can certainly assure you from Amerisafe standpoint, our reserving philosophy has not changed. And I do feel like my claims adjusters because of their practices and the way they reserve claims and the way they intimately know their claims are truly reflecting in our reserves what we believe is most likely outcome and have their for lack of a term, their finger on the pulse of what's happening in terms of survivability and procedures and the assumed inflation that goes into that. So I believe that's built into my case reserves. Speaker 200:16:02So that when we find the opportunities to help an injured worker move on and return to work and have their medical care taken care of, we find those opportunities. And for us at least, that has resulted in favorable development. I don't see that. That pattern, that philosophy has not changed. Speaker 500:16:26Understood. And then how about the construction in market, the question about the next job, we've talked about many times over the years, but how does that stand today? Speaker 200:16:41Our insurance are working, hence why we're having this favorable audit premium. We are still experiencing wage inflation within our industry groups. For the quarter, wage inflation was around 6%, 5%, almost all of that really came from increased wages, less so from new employees. So and that's been very consistent. So the fact that we're not seeing a large influx of new employees doesn't really surprise me given that we insure small to mid sized employers. Speaker 200:17:15But they're obviously working and wages are and payroll insured payrolls are going up. So I think that speaks positively for our industry groups. Speaker 500:17:26Great. Thank you very much. Speaker 200:17:29Thank you, Mark. Operator00:17:38Our next question is coming from Gregory Peters with Raymond James. Speaker 700:17:43Good morning, everyone. Speaker 100:17:45Good morning, Greg. Good morning. Speaker 700:17:48Just I was looking at the 6 month result on the expense ratio versus last year and it's up a little bit, say, 90 basis points. Just curious if there's anything structural that's going on driving that expense ratio higher? Speaker 300:18:05Greg, how are you? The growth that you're seeing in the expenses for the 6 months is really just further investing in the sales side, underwriting, just the front of the house. But again, based on the fact that expenses are never linear either, the investment is probably more upfront now in these 1st 6 months and then it should level off and then we assume to be back in what the range is for us for an annual expense ratio. Speaker 700:18:42Okay. And then just pivoting back to the growth comment. Janelle, I thought you said in the comment on the call, EU policy count growth has been positive for the last 5 consecutive quarters. I don't want to misquote you. But has it been concentrated with certain distribution partners or certain geographies? Speaker 700:19:05Or maybe you can give us some color where the growth is coming from? Speaker 200:19:10Yes, great question. And the answer is no, it's not coming from a particular distribution network. As you know, we use independent agents. That hasn't changed. Actually, if you look at our agent counts, they're probably slightly down. Speaker 200:19:25And that's really because, as I mentioned earlier, we're really working on pipeline efficiency, making sure that we're doing business with the right agents and the agents that we can serve best. So that's been a very positive thing for us. The policy growth has really been I'm going to attribute this to what I just mentioned, which is just the pipeline efficiency, trying to make things a little bit more efficient for our agents in terms of ease of doing business, the time we turn around quotes, making sure that we're giving we are making the most of the opportunities that we have. And because of those things and the efforts of our employees, we have been able to grow policy count. But it's not to your point about industry groups or states, it's not particular to an industry group, it's not particular to a certain type or particular agency distribution. Speaker 200:20:19Nothing and then I guess it goes back to what I was saying earlier in the call. It's not I wouldn't say it's nothing it's anything new that AMERISAFE is doing. It's really just being better as the way we're handling our agency relationships. Speaker 700:20:35And I'm going to come at the severity question again. I know you were addressing it in your previous answers, but on some of the other conference calls, the concept the fact that Florida has raised its reimbursement schedules, Medicare reimbursement schedules beginning next year. That's come up in a couple other calls. And so, I'm just curious as we look forward what you think about how are you measuring out or gauging what your outlook is on severity? Speaker 200:21:11Right. That's yes. So Florida is certainly top of mind for everyone because they've made adjustments to both physician charges and surgical procedures and that seems to be the 2 that everyone's talking about. Because when you look at the percentages increases, you think, wow, that's pretty significant. I believe a couple of things about that. Speaker 200:21:32Those are the kinds of things that I mentioned when I was talking earlier about medical inflation and things we're keeping our eyes on. That's exactly the kinds of things that we're talking about. Now when you look at those large percentages, one of the things that you do have to keep in mind is that we do have networks within each state that work on containing costs as well. So even it's not dollar for dollar in terms of, oh, the reimbursement rate gone up from 100% 110% to 175% for physician services. We also have to keep in mind that we have other cost savings mechanisms on top of that within our provider networks and those type of things. Speaker 200:22:14So it's not dollar for dollar. So that's one caveat. The second thing I'll say is, I think one of the beauties of Amerisafe and how we think about severity and case reserving, using this Florida example Florida as an example, I think really speaks to how our model works so efficiently. Because my claims adjusters are experts in their field and they are wholly focused on the workers' compensation reserve because we're a non aligned carrier. A, they're very attuned to what's happening in terms of their individual states and reflecting that in our initial reserves really, really quickly. Speaker 200:22:56So we're not it's not playing out over a long period time in terms of AMERISAFE loss experience. We're building that into our case our initial case reserves whenever that accident happens. That's important to us in terms of the severity and our recognition in the loss ratio. But keep in mind, it also helps us in terms of our pricing because then when we are underwriting a Florida account, we're taking all of that into account as to our real loss cost live, and reflecting that in our individual rate. That was a very long answer to your severity question. Speaker 700:23:36Excellent. Well, thank you both for the detailed answers. Speaker 200:23:39You're welcome. Operator00:23:45And our final question is coming from Bob Farnam with Janney. Your line is open. Speaker 600:23:50Hi there. Good morning. I've got more of a philosophical question. I'm thinking of the loss cost and they keep going down. And I'm wondering what is it going to take or what's the market conditions going to look like to have the loss cost bottom out? Speaker 600:24:08And how much of a lag will there be for the actual filings to catch up with the actual need to start raising rates? Speaker 200:24:17Yes. Great question. So what's it going to take? As I mentioned earlier, that AXA year combined ratio for the industry continuing to tick up and eventually break 100, that will help at least, I believe, slow the bleeding in terms of the rate decreases, because then accident years will not be considered profitable. To your point about these changes and using again, using Florida as an example, typically what happens when there's a major change going on, and I'll use Florida as an example since the NCCI state. Speaker 200:24:52NCCI will take those costs like if and try to figure out what's that actually going to cost the industry. And even if it's off cycle from a normal rate filing, because each state has their own rate filing dates, they can make like a law only filing. So in other words, something changed in the law that needs to be reflected in the rate and that should theoretically happen. But what happens immediately is when a carrier is aware of it, they start trying to reflect that in their pricing. So hence in their ELCM. Speaker 200:25:25So forget if the underlying loss cost, let's use, let's say an example, Florida that wouldn't change anything at all, then I would assume carriers within their Florida within Florida would try to within their own pricing, of course, Florida is an administrative price phase, it's a little tricky. But through their own competitive methods, let me just use it that way, try to make sure that they're building that into their premium dollars, the fact that they're going to be paying out more on the loss cost side. I believe that pressure will continue and we're going to see more and more examples that, which hopefully will slow the rate of decline or even flatten out the declines in approved loss costs, because I think those pressures are going to continue to happen. For the very reason I was speaking of earlier, physicians have an operating model for which they have a profit margin that they're trying to achieve. And if they're getting reimbursed by workers' compensation for something less than that, there's going to be either a shortage of providers. Speaker 200:26:28In other words, they're going to say, you know what, I don't want your workers' compensation patients or there's going to have to be some adjustment to the pricing. Speaker 600:26:37Right. So I mean, it sounds like, yes, despite the fact that loss costs are going down, the fact that even just this quarter, for example, your ELCM increased, it's kind of taking away some of that loss cost pressure just because you are getting more rate there. Is there a happy point with your retention that you'd be willing to go to if you keep raising rates and customers choose to go elsewhere? Speaker 200:27:10That's a really great way to look at it. If I try to rephrase that, how low would I let my we if you think about loss ratios or loss experience, we if you think about loss ratios or loss experience, typically you have better loss ratios and better loss experience on a renewal account than you would on a new account because you know the account. And then the Amerisafe case, not only do we know the account really well, we've been providing safety services to that account. So we know what their attitude towards safety is. So retention is extremely important to us. Speaker 200:27:48Do we test the market or do we think about when we do know, hey, we have to write underwrite something at a profitable level and that's going to affect our retention. Yes, we pay attention, but I will say underwriting profit above all other things. Speaker 600:28:05Right. And I'm not saying you should start raising your rates significantly. I don't want to start dragging adverse selection in there as well. So it's just something to I was just curious as you hopefully start to tweak your ELCM up, I just want to make sure your retention stays where it is. Speaker 200:28:24Absolutely. And the other thing I'll say this about rates, I haven't I don't think I've really talked about it on this call, Bob. One of the things we have to consider is the fact that wage inflation has been really strong for over a year now and it's starting to wane a little bit, but it's still 6% is nothing to bulk at. And that in some ways has effectively acted as rate for lack of a better term, right? If you have the same employees, but they're making higher wages and that's the basis of premium. Speaker 200:28:55It sort of helped bridge the gap a little bit in terms of the approved loss cost declines. Speaker 600:29:02All right, right. Okay. Thanks for all the color. Speaker 200:29:06Thank you. Operator00:29:10There are no further questions at this time. I will now turn the conference over to Janelle Frost, CEO for any additional or closing remarks. Speaker 200:29:21I'd like to highlight Amerisafe's inclusion in the Ward's 50 top performing property and casualty for the 16th consecutive year. This recognition underlies our employees' ability to use their expertise in high hazard workers' compensation niche to produce financial strength and stability for the company's stakeholders. Congratulations to the AMERISAFE team and thank you for joining us today.Read morePowered by