AMERISAFE, Inc. Price & Performance (AMSF)

Thank you, Catherine, and good morning, everyone. We are pleased to share Amerisafe's results for both the fourth quarter and the full year '20 A key priority throughout the year has been top line growth with consistent underwriting margin which is reflected in our gross premiums written increase of 3.9% for the fourth quarter 3.1% for the full year. Voluntary premiums on policies written rose by 8.5% in the fourth quarter and 4.6% for the year compared to 2023. While our in force policy count grew 9.6 Strong premium retention and robust new business production were the primary drivers for this growth. Underscoring our commitment to profitable growth in the competitive landscape. Despite industry wide headwinds, including rate reduction and declining wage inflation, our ability to identify and capitalize on profitable opportunity is a testament to the expertise and collaboration of our team. We are improving our agent relationships, protecting our policyholders and caring for injured workers. Our focus led to a combined ratio of 88.7% and an ROE of 20.2%. This success is the direct result of collaboration across the organization. And the empowerment of our employees to foster a sales driven culture. From frontline teams of underwriting sales and safety to the back end support of claims and premium audit, and operational functions such as regulatory, IT and finance.

Every department played a role in driving growth. Our employees have embraced the challenge of competing in a dynamic and C Markets where Burger's compensation is aligned as a line remains attractive to carriers. For the full year, our accident year loss ratio remained steady at consistent with the prior year. And we anticipate maintaining that level in twenty twenty five. Additionally, we recognized favorable development from prior and $34,900,000 for the full year 2024. On capital management front, Amerisafe's Board of Directors has approved a 5.4% increase in our regular dividend to $0.39 per share. Looking ahead, we remain focused on top line growth. We're confident that our ability to identify and ensure profitable high risk High hazard risk will continue to offset broader market challenges. With strong policy retention, and a disciplined approach to growth, Amerisafe remains committed to delivering exceptional value to our shareholders. With that, I'll turn the call over to Andy to discuss the financials.

You, Janelle, and good morning to everyone. For the fourth quarter of twenty twenty four, Amerisafe reported net income of 13,200,000.0 or $0.69 per diluted share and operating net income of $12,800,000 or $0.67 per diluted share. During the fourth quarter of twenty twenty three, net income was $19,200,000 or $1 per diluted share and operating net income of $14,300,000 or $0.74 per diluted share. The lower net income was primarily driven by lower net unrealized gains on equity securities. For the full year, net income was $55,400,000 and net operating income was $48,400,000 compared with $62,100,000 and $55,900,000 respectively. In 2023. First written premiums were $62,700,000 in the quarter and $294,100,000 for the year, growing 3.93.1% respectively. In the quarter and $270,600,000 for the year, growing 1.21.3%, respectively. Overall strong premium retention and new business production the primary drivers of top line growth for both the quarter and year reflecting an organizational focus on growing profitable sales despite competitive market demand. Our total underwriting and other expenses were $19,800,000 in the quarter a 4% increase compared with $19,000,000 recognized in the fourth quarter of twenty twenty three. This increase resulted in an expense ratio of 29.7% compared with 28.9% in the fourth quarter of twenty twenty three.

Increase was primarily the result of slightly lower earned premium growth in relation to other operating expenses. For the full year, the expense ratio was 29.6%, compared with 29.3% in 2023. For the year, our tax rate was 19.7%, unchanged from the prior [indiscernible] Turning to our investment portfolio. For the fourth quarter and full year net investment net investment income decreased 14.4% to $6,900,000 and 6.8% to 29,200,000.0 respectively. This was due to the decrease in investable assets following the payment of the special dividend in December. For the quarter, the yield on new investments increased approximately 42 basis points Portfolio and securities sold worse hundred thousand dollars in the quarter compared with a gain of $1,000,000 during the fourth quarter of twenty twenty three. The investment portfolio is high quality carrying an average AA- credit rating with a duration of four point four years. The composition of the portfolio is 62% in municipal bonds, 22% in corporate bonds, 3% in U. S. Treasuries and agencies, 7% in equity securities and 6% in cash and other investments. Approximately 56% of our bond portfolio is comprised of held to maturity securities due to the notable increase in rates during the quarter, the net unrealized loss was $13,300,000 at quarter end.

As a reminder, these held to maturity securities are carried at amortized cost and therefore unrealized gains or losses on these securities are not reflected in our book value. Our capital position is strong. A high quality balance sheet solid loss reserve position and conservative investment portfolio. Quarter end, Amerisafe carried roughly $830,000,000 in investments cash and [indiscernible] And finally, just a couple of other topics. Book value per share was $13.51 after paying the special dividend in December 2024, a decrease in book value of 11.6% from year end 2023. Operating return on average equity was 17.5% for the quarter and 17.1% for the full year. We will be filing our Form 10 ks with the SEC tomorrow, February twenty eight, after the market close. Operator, We'll now take a question from Mark Hughes with Truist. Yes, thanks. Good morning.

Janelle, policy count growth, I think you said 9.6%. Could you put that in the context of what you've experienced in recent quarters, And could you also talk about what the AMERISAFE size per policy has been, how that has trended over the last few quarters?

Yes, great. I believe, Mark, the 9.6% that I quoted was the year, That's on an import space not just the quarters. That was for the entire year. And how does that compare?

So I'm sorry. Go ahead. Oh, I was going to [indiscernible] in the fourth quarter Great question. I don't have that in front of me actually. I only got the year to date. Let me speak about the present line.

I guess the year over year is 09/2006 but percent. Yes. Policy growth in the fourth quarter was 2.6%.

Okay. And that's a sequential number?

Yes. Okay.

Very good. And then sorry for interrupting. You were saying I think I'd asked size as well?

Yes. So the size of policy. Our average policy size for 2024 was slightly lower than 2023. But still holding strong. We're certainly we're boosted by stronger payrolls Coming into the year, we knew that going into 2024 that we were seeing payroll growth In the fourth quarter, we saw some slowing in terms of average wages. If you recall, the last probably the first three quarters of twenty twenty four, we were seeing somewhere around 7% each quarter. It dropped to 4%.

In the fourth quarter of twenty twenty four, not a complete surprise, obviously, obviously, but we were trending higher than national averages and now we're starting to see some moderation there.

Okay.

Renewal [indiscernible] The pricing measures that shall not be named we don't We don't have that. Which is perfectly fine. But But generally speaking, this quarter, I think you had undertaken a strategy of of being a little more active on renewal rate Was that a contributor this quarter? Is that kind of run its course? Or how much was that an impact on the top line?

Great. Yes, it certainly was impactful to the quarter and to the full year actually. But for the quarter, our policy retention was 94.1% on a policy basis and on a premium basis, 88%.

So strong renewals.

And then your reserve gains, you I think you had some gains in 2022 earlier in the year and you you described This quarter also reserve gains from older active years including 2022. Any observations about the post COVID years, 2021, 2022, just kind of how they're shaping up?

Yes. Those are going to be good accident years. For you. The 9.7% favorable development or 9 percent $9,700,000 of favorable development we had this quarter A million of it was from $22 $1,500,000 was from '21, dollars $1,600,000 from '20 and then 2019 and prior, was $5,600,000 So we're obviously seeing even from the more green years, we're seeing favorable taste development come out of those [indiscernible] And then maybe one more, the ceded premium [indiscernible] elevated in this quarter. I think it was a little higher in the fourth quarter of last year, but even compared to that, it's up [indiscernible] If we think about I guess, number one, why was that? And then Number two, For 2025, should it be kind of back in the Yes, I see it as around 6%. Normally of gross premiums written Mark, it's Andy.

Good morning to you. So you're right, the recession was a little bit higher. I think that's because of the growth that we saw in the quarter. And of course, in Q4, we always go back and make sure that if there's any true up needed, it's done. But overall, it's really on the growth that we're seeing [indiscernible] the policy count coming through voluntary deck. [indiscernible] [indiscernible] as far as 2025, I think it's fair to say that Every quarter isn't linear. So I think the 6% you're saying is probably correct. It's right around that number.

Yes. Okay. Very good. I had a couple more, but I'll jump back in the queue. Thank you. Thank you, Mark. We'll now take a question from Matt Carletti with Citizens JMP.

Good morning, Matt.

First question is, you've talked a bit about what we've seen the voluntary growth really pick up back half of the year and think we've talked a bit about how that's been pretty intentional kind of interacting with your agencies and to be easy to do business with. And one of the aspects you pointed to, I think it was last call was kind of the idea of like getting them just to not think of you as like the roofing company and that you write other high hazard class codes and things like that. Have you seen that in the growth that's come through that there is an expanded kind of maybe appetite by the agency and that in certain cases you might have been pigeonholed to a particular type of risk and that's broadening and that's driving the growth? Or is it something else?

Well, this is a great question. We certainly have to your point, really have [indiscernible] making sure our agency base understands A, the value prop is really our safety and claim services. And then two, what our appetite is So making sure that that is easily accessible [indiscernible] both through our TSMs and both through digital platforms as well.

But getting our TSMs in front of agents are reiterating what do you have in your book Mr. Agent. That sits in Amerisafe's risk appetite and give us an opportunity. So the question to is that attributable to a growth? I would say yes. Could I percentages around that, probably no. But I will say this, we are trying to be sure that we are being more effective with the agents that we have appointed. So increasing the percentage of our agents that are submitting business to us and more importantly, end [indiscernible] number of agents that have a bind with us. Those are two numbers internally that we're really focused on. So driving home the appetite is part of that equation. [indiscernible] Okay, perfect. And then second question, kind of latter part of last year, couple of hurricanes came through areas in the country that you have a lot of business. Have you seen as any of Has any of the growth we saw in Q4 kind of been a result of kind of that reconstruction, if you will? Or would you expect to see any of that maybe as we go forward? I know it can take time for that to come through.

Yes. You're right, Matt. It does take time. Certainly hasn't shown up an audit premium yet because obviously we haven't audited those policies that would have been affected during those time periods. We do look at the monthly reporting that our policyholders are sending into us and we've we've seen some a little bit of increase if I look at Florida, Georgia and the Carolinas, but nothing that could point to and say, yes, that's definitely hurricane related business. I think it's more normal course of business So I don't know that I can quantify if any of that particular to storms?

Okay.

Great.

Thank you very much for the color. Appreciate it. Thank you, Matt.

And once again, that is We'll now take a question from Bob Farnham with Janney.

Hey there, good morning. I'd just like to maybe expand a little bit on Matt's question about the kind of the expansion of your new business.

And I just wanted to know are you looking at adding additional class codes as you're expanding? Or are you really just focusing on stuff that you already write?

We are focusing on things that we already write. If I talk about it in terms of hazard groups, A to G, We specialize in E, F and G and still over 80% of our in force policies are E, F and G. Even with our new business growth, that is our focus area. We haven't added necessarily classes of business. It's really about penetrating the market being more effective about that.

Right. Okay. That's what I thought.

And then just kind of a qualitative view on reserves. How much of your kind of open plain inventory is related to claims that are that are ten years or older. I'm trying to get an idea of kind of how how long claims can stay open and kind of what your the average duration of your liabilities is kind of what I'm getting at.

Yes. If I look at accident years and I'll use the same sort of the same accident years that we put in the 10 ks where we have 2023, 2022, it goes in the prior to 2019. Prior to 2019, I would say 99% of the claims that were reported to us [indiscernible] So very small percent of those are open. And some are open for there are some states that we can't technically close the claims. It's for medical reasons and so they're open for medical and we're done with the indemnity portion of the claim. Yes, 99% of those claims I would say, are closed. For those that for that prior to 2019.

Okay. So it sounds like relative to the overall workers' comp industry, your claims closures seem to be more quick than than maybe the average for the industry. Is that inaccurate? I believe so. And I totally give the credit to my claims organization. It is definitely in the way that AmeriSafe handles claims. We still use, we call it good old fashioned claims adjusting. We We meet with people, we take written statements, we manage those claims intensely and we keep those low inventories per field case manager. I can't stress that enough. I know that that is unique to Amerisafe. On average, a Many field case managers on average, they have less than 50 claims opportunity to make a difference in these claims, know these claims, and that's how we're able to close them and find resolutions, getting maximum medical improvement, return those injured workers to work as quickly as we can, because they have the opportunity and the means to which to close those claims.

Great.

All right. Thanks for being interested in Thank you, Bob.

And once again, that is now take a follow-up from Mark Hughes with Truist.

Yes.

Thanks. You talked about the payroll, one of the concepts that's come up from time to time is kind of that next job in construction. Do you have any view on the construction industry and the prospects there?

You know, look, I feel I mean, this is world according to Janelle, but my opinion is that at least for our insured base, the economy seems to be supporting their work pretty well. Mean, we're still seeing strong payroll growth there. We are finding We think about all the headlines that I read every day and we always contemplate how does that affect our book of business. We think about tariffs and what that could mean to construction as a whole. I know people talk about steel and those types of things. Not that we're completely isolated from that, but you also think about small to midsize employers. I do think we have some buffer around those types of impacts to the industry as a whole. So not immune, but may somewhat insulated, I would think. Immigration is again a question that we've been asked about particularly regarding our construction agriculture book. For Amerisafe, I don't have a way of quantifying from the premium side of things. How many of our workers are non documented workers, But certainly, we know from a claims perspective, we do have injured workers that are non documented workers. But from a claims perspective, They are entitled to the same benefits every other worker is entitled to. [indiscernible] if I play that through in my mind, what happens for non documented workers, particularly in our construction book [indiscernible] Could it be influential to the labor force? [indiscernible] But again, these are small to midsize employers.

So even if it is influential in terms of maybe less resilient labor force. Perhaps that also could lead to higher wages if those jobs are replaced. With documented workers. So headline wise, those are the things I think about in terms of our industries spans the economy as it as it stands, but I mean, as of right now, obviously, things change every day. But as of right now, I feel pretty strongly that our construction book and even our entire book is has a bright future for 2025. [indiscernible] How about the large claims for the year?

Yes. So you're going to laugh when I say this Mark, but it's been a while since I've had to use this word, but it's lumpy. So we ended the year with 18 claims. Over $1,000,000 and when you look comparatively to 2023, which was a record year in terms of a loan number nine, is there I I hearken back to my lumpy words 'eighteen is not that unusual. If I look at the five year average of where we were at twelve months, because obviously claims develop after an accident at the end of an accident year.

But if I look at the five year AMERISAFE, it's at twelve months, we average around fifteen. So 2018 is not too far off of the average. But compared to 2023, that number certainly you look at and go, wow, that's a change. But when you look at the book as a whole, it's really not that that much of a frequency of severity. It's just there were 18 claims. I look at how they occurred or what industries they incurred in, it very much mirrors our book of business. And even the types of injury have been are very consistent with what we've seen in terms of the types of injuries Obviously, falls and slips being the number one cause of loss for those larger claims and that's true for 24 Yes.

Okay.

And then anything on the medical inflation front either from costs or ability to access certain services in case of Lack of capacity because reimbursement rates are too low. Any Any changes there you've noted? No real development other than what we've shared over the last couple of quarters. Home Health is Joe, probably the one I focus on the most simply because it's such a big component of our larger claims. Home health is a big component of those costs. So we certainly are paying attention to that.

But nothing new other than that than those things in terms of reimbursement rate. No. We certainly are monitoring the loss costs or the rates that are being approved by the states and how that could or could not be impactful. But there's been a wide range. If you look at the loss costs that have been approved for oneone or the ones that we know about for 2025 at this point. I think the high is a 19% decrease in Maine and the say the high, the low the decrease. And then the largest increase I think we've seen is 6.5% in Nevada.

But there's a wide range there in the loss costs that are being approved. So how medical costs will influence or how the reimbursement rates will influence that on a go forward basis?

I guess time would tell. But I don't I can't see anything in those rate filings that were specific to medical fee schedules being adjusted to the degree that it was a highlight in the rate filing, I don't I don't recall that. It's been more just experience. [indiscernible] Did you have you averaged up the rate filings if you look at the recent trend, [indiscernible] yes, I shouldn't I don't think I have to say this, but it's a decrease. Of and somewhere around the mid single digit range. [indiscernible] How was that midyear or this time last year?

So for 'twenty that's a good point. In 2023, we were sort of upper single digits. So more in the 8% to 9% depending I think we said somewhere in the range of seven to nine.

Yes.

Little ever so slight improvement if you're trying to get me to give you great news about rates?

Hey, it's an inflection. [indiscernible] [indiscernible] And then anything on the audit [indiscernible] We're just kind of progressing through that earlier period of wage inflation. And so as you do the audits and the look back, it's kind of naturally tapering Is that a way to think about it? Maybe that audits just naturally from a macro perspective you'll You'll see deceleration there?

Yes. I believe we'll see a deceleration deceleration or a moderation. I don't see Again, looking forward to 2025 based on what I know today. I don't see audit premium turning negative. I think it still remains positive. I think the new employee counts still been averaging between that 12% of the things that we've been seeing each quarter. And then there's been wage inflation. I don't think there's I don't foresee that flipping to be negative, but certainly the year over year comparisons get tough are going to get tougher and tougher and there'll be deceleration from that standpoint. But standalone audit premium, I believe, will still remain positive in 2025.

Yes. And then any instances of any competitors getting More aggressive for workers' comp premium It seems like you're Your own and then some in terms of policy count and premium growth. So you wouldn't know it by looking at it in that sense. But I'm just sort of curious whether you seen any changes It is very competitive, Mark. If that's a change, probably not. But as as the other P and C lines have not yet rectified their issues in terms of overall results, workers' compensation remains attractive. So as long as the combined ratios for the industry remain attractive, we will have competitors and we will have competitors dipping into the high hazard space [indiscernible] that we are prepared to base.

Yes. I would zipping into high hazard [indiscernible] for advice. Yes. I would say that. That's super dangerous. You need to stay away. Exactly. Any early thoughts on LOSTPICC for 2025 Yes. As of right now, I believe we're going to hold Okay. Very good. Thank you for all the answers.

And it appears there are no further telephone questions. And it's turn the conference back to Ms. Frost for any additional or closing comments. Profitable incremental growth is the focus goal for the AMERISAFE team. One that we delivered on in 2024 and are well positioned for for 2025. Thank you for joining us today. And once again, that does conclude today's conference. Thank you all for your participation.

You may now disconnect.