Q2 2024 AMERISAFE Inc Earnings Call

Good 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 Kathryn Shirley, Chief Administrator Officer. Please go ahead.

Operator: 24, Second Quarter Earnings Call. Today's conference is being recorded.

Kathryn Shirley: At this time, I would like to turn the conference over to Kathryn Shirley, Chief Administrator Officer. Please go ahead.

Operator: for the 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.

Kathryn Housh Shirley: Good morning. Welcome to the Amerisafe 2024 Second Quarter Investor Call. If you have not received the earnings release, it is available on our website at www.amerisafe.com. This call is being recorded. A replay of today's call will be available. Details on how to access the replay are included in the earnings release.

Kathryn Shirley: Good morning.

Kathryn Shirley: Welcome to the Amerisafe 2024 second quarter investor call. If you have not received the earnings release, it is available on our website at Amerisafe.com.

Speaker Change: Good morning. Welcome to the Amerisafe 2024 Second Quarter Investor Call. If you have not received the earnings release, it is available on our website at Amerisafe.com.

Kathryn Shirley: This call is being recorded. A replay of today's call will be available. Details on how to access the replay or in the earnings release.

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.

Kathryn Housh Shirley: 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 risk, 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-K, Form 10-Q, 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.

Kathryn Shirley: 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 the results of risk uncertainties and other factors, including factors discussed in the earnings release, in the comments made during today's call, and in the risk factor section of our Form 10-K, 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 Change: During this call, we will be making forward-looking statements.

Speaker Change: These statements are based on current expectations and assumptions that are subject to various risks and uncertainties.

Speaker Change: Actual results may differ materially from the results expressed or implied in these statements.

Speaker Change: if the underlying assumptions prove to be incorrect.

Speaker Change: or as a result of risk, 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-K , Form 10-Q , and other reports and filings with the Securities and Exchange Commission.

Speaker Change: We do not undertake any duty to update any forward-looking statements.

Janelle Frost: I will now turn the call over to Jamel Frost, Amerisafe President and CEO. Thank you, Catherine, and good morning, everyone. The state of the workers' compensation market remains profitable, despite continued rates offening. The industry-wide data published by NCCI and 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 lost costs to clients. 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 Change: I will now turn the call over to Janelle Frost, Amerisafe's President and CEO .

Gerry Janelle Frost: Thank you, Catherine, and good morning, everyone. The state of the workers' compensation market remains profitable despite continued rate cuts. The industry-wide data published by NCCI in May was similar to what we've seen over the last few years, with an accident year combined ratio below 100 and redundant reserves driving approved loss cost decline. These conditions translate to a competitive marketplace, one in which Amerisafe's disciplined underwriting is critical to long-term profitability.

Gerry Janelle Frost: Thank you, Catherine, and good morning, everyone. The state of the workers' compensation market remains profitable despite continued rate softening.

Speaker Change: 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.

Speaker Change: These conditions translate to a competitive marketplace, one in which Amerisafe's disciplined underwriting is critical to long-term profitability.

Gerry Janelle Frost: For several quarters, we have discussed our investment in profitable growth through greater agent engagement and pipeline efficiency. These actions drove year-over-year gross premium 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 were also a boost to the top line. Turning to losses, our accident year loss ratio was in line with the prior year at 71%.

Speaker Change: For several quarters, we have discussed our investment in profitable growth through greater agent engagement and pipeline efficiency. These actions drove year-over-year gross premiums written growth of 6.6% in the quarter.

Janelle Frost: These 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 lost ratio was in line with the prior year at 71%. Lost costs trends remain in line with previous quarters. We continue to monitor medical inflation. However, medical fee schedules are, in general, containing costs. The company experienced 8.1 million in favorable development on prior accident years, primarily from accident years 2020, 2021, and 2022.

Speaker Change: 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.

Speaker Change: Audit premiums supported by wage inflation was also a boost to top line.

Speaker Change: 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. We continue to monitor medical inflation. However, medical fee schedules are in general containing costs.

Speaker Change: The company experienced $8.1 million in favorable development on prior accident years, primarily from accident years 2020, 2021, and 2022.

Janelle Frost: We attribute our favorable development to lower claim severities and proactive claims handling.

Speaker Change: We attribute our favorable development to lower claim severities and proactive claims handling.

Janelle Frost: Despite challenging market conditions, the Amerisafe's focus on providing protection to small, mid-sized businesses and caring for their workers has a track record of strong retention and delivering robust returns to shareholders throughout the cycle.

Gerry Janelle Frost: Lost cost trends remain in line with previous quarters. We continue to see and continue to monitor medical inflation. However, medical fee schedules are, in general, containing costs. The company experienced $8.1 million in favorable development on prior accident years, primarily from accident years 2020, 2021, and 2022. We attribute our favorable development to lower claim severities and proactive claims handling. Despite challenging market conditions, Amerisafe's focus on providing protection to small to mid-sized businesses and caring for their workers has a track record of strong retention and delivering robust returns to shareholders throughout the cycle. With that, I'll turn the call over to Andy to discuss the financials. Thank you.

Speaker Change: Despite challenging market conditions, Amerisafe's focus on providing protection to small to mid-sized businesses and caring for their workers has a track record of strong retention and delivering robust returns to shareholders throughout the cycle.

Andy: With that, I'll turn the call over to Andy to discuss the financials. Thank you, Danielle, and good morning to everyone. For the second quarter of 2024, Amerisafe reported net income of 11 million or 57 cents per diluted share, an operating net income of 11.1 million or 58 cents per diluted share. During the second quarter of 2023, net income was 15.6 million or 81 cents per diluted share; an operating net income was 14 million or 73 cents per diluted share. First written premiums were 76.4 million in the quarter compared with 71.7 million in the second quarter of 2023.

Andy: Thank you, Janelle, and good morning to everyone. For the second quarter of 2024, Amerisafe reported net income of $11 million, or $0.57 per diluted share, and operating net income of $11.1 million, or $0.58 per diluted share. During the second quarter of 2023, net income was $15.6 million, or $0.81 per diluted share, and operating net income was $14 million, or $0.73 per diluted share. First written premiums were $76.4 million in the quarter, compared with $71.7 million in the second quarter of 2022.

Andy: With that, I'll turn the call over to Andy to discuss the financials. Thank you, Janelle, and good morning to everyone. For the second quarter of 2024, Amerisafe reported net income of $11 million, or $0.57 per diluted share, and operating net income of $11.1 million, or $0.58 per diluted share.

Speaker Change: During the second quarter of 2023, net income was $15.6 million, or $0.81 per diluted share, and operating net income was $14 million, or $0.73 per diluted share.

Speaker Change: Gross written premiums were $76.4 million in the quarter compared with $71.7 million in the second quarter of 2023.

Andy: The increase in the top line was driven by a combination of increased sales efforts with agents, which drove increased new business and strong retention. Audit premiums increased the top line by $7.3 million compared with $4.8 million in the second quarter of 2023. Our total underwriting and other expenses were $20.4 million in the quarter compared with $20 million in the second quarter of 2023, resulting in an expense ratio of 29.8% 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.

Andy: The increase in the top line was driven by a combination of increased sales efforts with agents, which drove increased new business and strong returns. Audit premiums increase the top line by $7.3 million compared with $4.8 million in the second quarter of 2023. Our total underwriting and other expenses were $20.4 million in the quarter compared with $20 million in the second quarter of 2023, resulting in an expense ratio of 29.8% 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.

Speaker Change: 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 Change: Audit premiums increased the top line by $7.3 million compared with $4.8 million in the second quarter of 2023.

Speaker Change: Our total underwriting and other expenses were $20.4 million in the quarter compared with $20 million in the second quarter of 2023, resulting in an expense ratio of 29.8% compared with 30.4% in the prior year.

Speaker Change: We continue to invest in our business, leveraging Amerisafe's disciplined approach to take advantage of attractive market opportunities.

Speaker Change: For the quarter, our tax rate was 20% compared to 20.1% in the prior year.

Andy: Turning to our investment portfolio, in the second quarter, net investment income decreased 3.6% to $7.4 million due to a lower asset base versus 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 increase of proxiesment in 165 basis points in relation to roll-off driving our tax equivalent book yield to 3.79%, or 17 basis points higher than the second quarter of 2023. The investment portfolio is a high quality carrying an average double A minus credit rating with a duration of 3.9 years.

Andy: Turning to our investment portfolio, in the second quarter, net investment income decreased 3.6% to $7.4 million due to a lower asset base versus the prior year. However, 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%, or 17 basis points higher than the second quarter of 2023.

Speaker Change: Turning to our investment portfolio, in the second quarter, net investment income decreased 3.6% to $7.4 million due to a lower asset base versus the prior year.

Speaker Change: On a consecutive quarter basis, net investment income increased 1.1% for Q2 of 2024 versus Q1 of 2024.

Speaker Change: 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%, or 17 basis points higher than the second quarter of 2023.

Andy: The investment portfolio is high-quality, carrying an average AA- credit rating with a duration of 3.9 years. The composition of the portfolio is 58% in municipal bonds, 28% in corporate bonds, 3% in U.S. Treasuries and agencies, 6% in equities, and 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 and maturity securities are carried at amortized cost, and therefore, unrealized gains or losses on these securities are not reflected in our book value.

Speaker Change: 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.

Andy: The composition of the portfolio is 58% of municipal bonds, 20% in corporate bonds, 3% in US 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 and maturity securities are carried at advertised 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 $884 million in investments, cash, and cash equivalents.

Speaker Change: 28% in corporate bonds, 3% in U.S. treasuries and agencies, 6% in equities, securities, and 5% in cash and other investments.

Speaker Change: Approximately 57% of our bond portfolio is comprised of health and maturity securities. As a reminder, these health and maturity securities are carried at amortized cost and therefore unrealized gains or losses on these securities are not reflected in our book value.

Andy: Our capital position is strong, with a high-quality balance sheet, a solid loss reserve position, and a conservative investment portfolio. At quarter end, Amerisafe carried roughly $884 million in investments, cash, and cash equivalents. The Company's Board of Directors declared a regular quarterly cash dividend of $0.37 per share on Friday, July 26, 2024 for shareholders with a record of September 6, 2024. And finally, a couple of other topics. The book value per share was $15.78, and the operating return on average equity was 14.4%. Our statutory surplus was $280.6 million at quarter end, up 10.1% from $254.9 million at December 31, 2023.

Speaker Change: 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 $884 million in investments, cash and cash equivalents.

Andy: Companies, board of directors declared a regular quarterly cash dividend of 37 cents per share on Friday, July 26, 2024, to shareholders' record of September 6, 2024. And finally, a couple of other topics. Book value per share was $15,078 and operating rate return on average equity was 14.4%. Our statutory surplus was 280.6 million at quarter and up 10.1% from 254.9 million at December 31, 2023.

Speaker Change: Companies Board of Directors declared a regular quarterly cash dividend of 37 cents per share on Friday, July 26, 2024 to shareholders record of September 6, 2024. And finally a couple of other topics.

Speaker Change: Book value per share was $15.78 and operating rate return on average equity was 14.4%.

Speaker Change: Our statutory surplus was $280.6 million at quarter end, up 10.1% from $254.9 million at December 31, 2023. And finally, today, July 30, 2024, we will be filing our Form 10-Q with the SEC after market close.

Operator: And 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 you. If you would like to ask a question, please

Andy: And finally, today, July 30, 2024, we will be filing our Form 10-Q with the SEC aftermarket close.

Operator: With that, I would like to open the call for the question-and-answer portion of the call operator. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, you can press star one to ask a question, and we'll pause for just a brief moment to allow everyone an opportunity to signal for questions.

Speaker Change: With that, I would like to open the call for the question and answer portion of the call. Operator?

Operator: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, you can press star 1 to ask a question, and we'll pause for just a brief moment to allow everyone an opportunity to signal for questions. And our first question is coming from Matt Carletti with Citizens JMP.

Speaker Change: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad.

Matthew Carletti: And our first question is coming from Matt Carletti with Citizens JMP.

Speaker Change: And our first question is coming from Matt Carletti with Citizens JMP.

Janelle Frost: Good morning, Janelle. Good morning, Andy. Good morning, Matt. I 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, and you're opening comments about some of the recent efforts and investments you've made in kind of agency relationships. I'm hoping maybe you can give a little more color. I mean, noted it was you have the voluntary, grew nicely, the press release reference pith growth. It's kind of how you feel about the sustainability of that as we move forward or kind of the ability to build that going forward.

Matthew John Carletti: Good morning, Janelle. Good morning, Andy. Good morning, Matt.

Matthew John Carletti: Good morning, Janelle. Good morning, Andy.

Matthew John Carletti: I guess my first question is, Janelle, maybe you could expand a little bit on the growth in the quarter. I know you made a comment in your opening comment about some of the recent efforts and investments you've made in agency relationships. You know, I'm hoping maybe you can just give a little more color. I mean, noted it was, you know, the voluntary grew nicely. The press release referenced PIF growth. Just kind of how you feel about the sustainability of that, you know, as we move forward or kind of the ability to build on that going forward.

Andy: Good morning, Matt.

Matthew John Carletti: I 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 comment about some of the recent

Anastasios George Omiridis: and Anastasios Omiridis.

Speaker Change: you know, as we move forward, or kind of the ability to build that going forward.

Gerry Janelle Frost: Certainly Matt. You know this is our fourth quarter and I want to say either slight growth in voluntary debt premium or relatively flat. So that's something that we have made a concerted effort on with our employees and with our agents and just trying to make the pipeline more efficient in terms of easing doing business and building on those agent relationships. So I do feel like we're gaining some momentum there through our employee effort. It's really not a change in Amerisafe's approach to the business at all.

Janelle Frost: Certainly, Matt. You know, this is our fourth quarter. I want to say it 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 easy doing business and building on those agent relationships. So I do feel like we're gaining some momentum there through our employee effort. It's really not a change in Amerisafe's approach to the business at all. It's really just about creating efficiency and valuing those relationships.

Speaker Change: Certainly, Matt. You know, this is our fourth quarter, I want to say, of either slight growth in voluntary debt premium or relatively flat.

Speaker Change: So that's something that we have made a concerted effort on with our employees and with our agents and just trying to make the pipeline more efficient.

Speaker Change: in terms of easing doing business and building on those agent relationships. So I do feel like we're gaining some momentum there through our employee effort. It's really not a change in...

Gerry Janelle Frost: It's really just about creating efficiencies and valuing those relationships. So I feel pretty good about the growth. You're absolutely right.

Speaker Change: Amerisafe's approach to the business at all, it'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 five quarters.

Janelle Frost: 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 five quarters. So those are all signs there are pointing to the efforts that we're putting in place are generating business growth for us.

Gerry Janelle Frost: We've had voluntary debt growth of 2.7 percent in the quarter. We've grown policy count, I believe, for the last five quarters. So those are all signs that are pointing to the efforts that we're putting in place are generating business growth for us.

Speaker Change: So those are all signs that are pointing to the efforts that we're putting in place are generating business growth for us.

Matthew Carletti: Wonderful. And then there's a couple of numbers questions, if I could. One is what was the ELCM in the quarter?

Matthew John Carletti: And then there's a couple of numbers questions if I could. One is, what was the ELCM in the quarter? 148.

Speaker Change: Wonderful, and then here's a couple numbers questions if I could. One is what was the ELCM in the quarter?

Janelle Frost: 148. 148 okay.

Matthew John Carletti: Okay, and then on audit premium, do you have handy what... 3rd quarter of 23 audit premium was just to get an idea of kind of the potential comparison this quarter. Exactly. Third quarter last year was 5.6 million. Second quarter, we're still pointing.

Janelle Frost: And then on audit premium, do you have handy what third quarter of 23 audit premium was, just to get an idea of kind of the potential comparison in this quarter?

Speaker Change: 148

Speaker Change: Okay, and then on audit premium, do you have handy what...

Speaker Change: third quarter of 23 audit premium was, just to get an idea of kind of the potential comparison in this quarter.

Janelle Frost: Exactly. Third quarter last year was 5.6 million. Second quarter was 0.8.

Speaker Change: Exactly. Third quarter last year was $5.6 million.

Matthew John Carletti: Wonderful. All right. Thank you so much.

Matthew Carletti: Wonderful. All right. Thank you so much.

Speaker Change: The second quarter was 0.8.

Mark Hughes: You're welcome. Our next question is coming from Mark Hughes with Truis. Your line's open. Morning. You know, morning, Amy. Morning, Mark.

Speaker Change: Wonderful. All right. Thank you so much.

Mark Douglas Hughes: Our next question is coming from Mark Hughes with Truist. Your line is open.

Speaker Change: You're welcome.

Speaker Change: Our next question is coming from Mark Hughes with Truist. Your line is open.

Mark Douglas Hughes: Morning, Joe. Good morning, Andy. Morning, Mark. Janelle, if I heard you properly, it sounds like the 148 is 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.

Mark Douglas Hughes: Morning, Joe. Morning, Andy.

Janelle Frost: Janelle, if I heard you properly, it sounds like the 148. I think that's up here every year, which I think you had a flat result in 3Q, but then that's the first positive number. Still scrolling, still scrolling. By a while. Yeah, 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 cost. So, as we all know, the underlying loss cost, the approved race coming out of the states, continue to decline. Because we individually underwrite every account, you know, we have to make sure that we are doing so profitably.

Mark: Morning, Mark.

Mark Douglas Hughes: Janelle, if I heard you properly, it sounds like the 148, I think that's up year over year.

Speaker Change: which I think you had a flat result in 3Q, but then that's the first positive number.

Mark Douglas Hughes: Uh, it's been quite a while. Yeah, that's right, Mark.

Speaker Change: Still scrolling, still scrolling.

Gerry Janelle Frost: Yeah, 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 just an index over the underlying loss cost. So, as we all know, the underlying loss cost, 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 Change: Thank you.

Gerry Janelle Frost: Yeah, that's 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 cost. So as we all know the the underlying loss cost, the approved rates coming out of the states, continue to decline.

Speaker Change: Because we individually underwrite every account, we have to make sure that we are doing so profitably. And so, just like every other carrier right now, we're battling the fact that rates continue to soften.

Gerry Janelle Frost: And so, just like every other carrier right now, we're battling the fact that, you know, 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, you know, there is some deterioration there. So, I just feel like, you know, we are reaching that point where we have to be very protective of that.

Janelle Frost: And so, as we were bad, just like every other carrier right now, we're battling the fact that, you know, race continued to the results for the industry. You know, while the low 100, if you look at accident, your combined ratios for the industry as a whole, each year there is some deterioration there. So, I just feel like, you know, we are reaching that point where we have to be very protective of that. Right, yeah.

Speaker Change: The results for the industry, you know, while below 100, if you look at accident year combined ratios,

Speaker Change: 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.

Janelle Frost: Any details on the approved loss cost, obviously they're down, any trend of, you know, new state data in the quarter this worth noting? No, the overall approved loss cost is somewhere around eight and nine percent decrease for the year for the 2024 filing. So, and, you know, 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 a low 100 percent combined. Yeah.

Gerry Janelle Frost: Any details on the approved loss costs? Obviously, they're down. Any trend of, you know, new new state data in the quarter that's worth noting? No,

Speaker Change: Right, yeah.

Speaker Change: Any details on the approved loss costs?

Speaker Change: trend of, you know, new state data in the quarter, that's worth noting.

Gerry Janelle Frost: No, the overall approved loss cost is somewhere around an 8-9% decrease for the year for the 2024 filing. So, you know, I think that's pretty much on course with what NCCI was predicting. Again, because at this point, the industry is, you know, even on an accident-year basis, the industry is below 100% combined.

Speaker Change: No, the overall approved loss cost is somewhere around 8-9% decrease for the year for the 2024 filings.

Speaker Change: So and you know I think that's pretty much on course with what NCCI was predicting. Again because at this point the industry is, you know, even on an accident year basis the industry is below 100% combined.

Janelle Frost: The, you talk about medical inflation that the fee structures or the fee schedules continue to restrain that, is that ever going to separate them, and is there ever any reason that thinks that's not going to just keep the lid on it, and you'll continue to benefit from kind of the government rate suppression, one might say. You know, Mark, 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 they 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 eye on medical inflation, that's actually what I'm referring to.

Speaker Change: yeah

Mark Douglas Hughes: You talk about medical inflation that the structures or the schedules continue to restrain that. Is that ever going to separate? I mean, is there ever any reason to think that it's not going to just keep a lid on it and you'll continue to benefit from it? Kind of government rate suppression, one might say. You know, I

Speaker Change: The

Speaker Change: You talk about medical inflation that the...

Speaker Change: The structures or the schedules continue to restrain that.

Speaker Change: Is that ever going to separate them and 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 it?

Gerry Janelle Frost: You know, Mark, I believe that's actually where we're going to see pressure for the most part. These schedules have been doing their job in terms of containing costs, but I do believe there is pressure, particularly on certain types of services. There is pressure from the provider side of what they're being reimbursed for workers' compensation. When I talk about 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 Change: Kind of the government rate suppression, one might say.

Speaker Change: You know, Mark, I believe that's actually where we're going to see pressure. For the most part,

Mark Douglas Hughes: These schedules have been doing their job in terms of containing costs.

Mark Douglas Hughes: But I do believe there are pressure, particularly in certain types of services, there is pressure.

Mark Douglas Hughes: 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

Janelle Frost: The fact that at some point, the rubber hits the road in terms of what providers, whether it's hospitals, physicians, surgeons, or 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. Yeah.

Mark Douglas Hughes: 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.

Janelle Frost: Is the, up to an ELCM, does that reflect a little less competition? I know you're being disciplined around. I wish. No, it does not reflect less competition. It is still a very competitive marketplace. Yeah.

Mark Douglas Hughes: Does the uptick in the ELCM reflect a little less competition? I know you're being disciplined around it. I wish.

Mark Douglas Hughes: yeah

Speaker Change: Does the uptick in the ELCM, does that reflect a little less competition? I know you're being disciplined around it. I wish. No, it does not reflect less competition. It is still a very competitive marketplace.

Gerry Janelle Frost: No, it does not reflect less competition. It is still a very competitive marketplace. Yeah, and then anything on the large plane.

Janelle Frost: And then anything on large claims, how was they turned it through the six months? Through the six months, we are at four claims over a million dollars. So that's, you know, again, I have to, every time I throw out that number, I have to caution. So 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 have had a frequency of severity in terms of a million dollar claims. Yeah.

Speaker Change: Yeah, and then anything on the large claims, how have they trended through the six months? Through the six months we are at four claims over a million dollars.

Mark Douglas Hughes: How have they trended through the past six months?

Gerry Janelle Frost: Through the six months, we are at four claims over a million dollars. Again, every time I throw out that number, I have to caution that that is lumpy. I never know what quarters are going to happen, is or is not going to happen, but at this point, we haven't had a frequency of severity in terms of million-dollar claims.

Speaker Change: So that's, you know, 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, you know, it is or is not going to happen, but at this point, we haven't had a frequency of severity in terms of million-dollar claims.

Mark Douglas Hughes: Yeah, and then on reserve development, you guys are still performing tremendously, but you know 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? You know, just sort of from a very simplistic perspective, that was a little bit lower this quarter compared to the last couple of years.

Janelle Frost: And then on reserve development, you guys are still performing tremendously, but, you know, no deed going unpunished. It was down a little bit from even more stellar performance, you know, in recent quarters. Anything you would say is why... From a very simplistic perspective, that was a little bit lower this quarter compared to the last couple of years. Yeah, I like how you phrase that. We're reserve development; at least for Amerisafe, reserve development is not linear. I often talk about the favorable case development that we had, or the fabled development that we recognize is truly coming from individual cases.

Speaker Change: And then on the reserve development, you guys are still...

Speaker Change: performing tremendously but you know no

Anastasios George Omiridis: and Anastasios Omiridis.

Speaker Change: You know, just sort of from a very simplistic perspective, that was a little bit lower this quarter compared to the last couple of years.

Gerry Janelle Frost: Yeah, I like how you phrased that, you know, reserve development, at least for Amerisafe, reserve development is not linear, right? I often talk about, you know, the favorable case development that we have, or the favorable development that we recognize is truly coming from individual cases. I can't predict when the in which quarters those are or are not going to happen.

Anastasios George Omiridis: Yeah, I like how you phrased that, you know, reserve development, at least for Amerisafe, reserve development is not linear, right?

Anastasios George Omiridis: I often talk about, you know, the favorable case development that we have, or the favorable development that we recognize as truly coming from individual cases.

Janelle Frost: I can't predict when the which quarters are not going to happen. It's hard for me to balk at $8 million of favorable development, even though, to your point, it is less than the 10.9 that we had in the second quarter of last year. I still consider that to be a very healthy number. I can certainly assure you, from an 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 the most likely outcome.

Anastasios George Omiridis: I can't predict which quarters those are or are not going to happen. It's hard for me to balk at $8 million of favorable development.

Gerry Janelle Frost: It's hard for me to balk at $8 million of favorable development, even though, to your point, it is less than the 10.9 that we had in the second quarter of last year. I still consider that to be a very healthy number. I can certainly assure you, from Amerisafe's 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 better term, their finger on the pulse of what's happening in terms of survivability and procedures and the assumed inflation that goes into that.

Anastasios George Omiridis: Even though, to your point, it is less than the 10.9 that we had in the second quarter of last year.

Anastasios George Omiridis: I still consider that to be a very healthy number. I can certainly assure you.

Anastasios George Omiridis: From Amerisafe's 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,

Janelle Frost: And have their lack for lack of their 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, so 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 from philosophy has not changed. Understood.

Anastasios George Omiridis: for lack of a better term, their finger on the pulse of what's happening in terms of

Anastasios George Omiridis: Survivability and Procedures and the Assumed Inflation that goes into that, so I believe that's built into my case reserves.

Gerry Janelle Frost: So, I believe that's built into my case reserves so that when we find 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 developments. I don't see that. That pattern, that philosophy has not changed.

Anastasios George Omiridis: So 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

Anastasios George Omiridis: And for us, at least, that has resulted in favorable development.

Anastasios George Omiridis: I don't see that. That pattern, that philosophy has not changed.

Mark Douglas Hughes: Okay. And then how about the construction? And Mark, I have a question about the next job we've talked about many times over the years, but how does that stand today?

Janelle Frost: And then how about the construction and mark out the question about the next job. We talked about it many times over the years, but how does that stand today? You know, our insurance is working, hence why we have it; we're having this favorable audit premium. We're 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 ensure small and inside employers.

Speaker Change: Understood. And then how about the construction and market, the question about the next job we've talked about many times over the years, but how does that stand today?

Gerry Janelle Frost: You know, our insurance is working, hence why we're having this favorable audit premium. However, we're still experiencing wage inflation within our industry group. For the quarter, wage inflation was around 6%, 5%, and almost all of that really came from increased wages, less so from new employees. 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. But they're obviously working, and wages and payroll, and insured payrolls are going up, so I think that speaks positively for our industry.

Speaker Change: You know, our insurance are working, hence why we're having this favorable audit premium. We're still experiencing wage inflation within our industry groups.

Mark Douglas Hughes: Great, thank you very much.

Speaker Change: For the quarter, wage inflation was around 6%, 5%, almost all of that really came from increased wages, less so from new employees.

Speaker Change: 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.

Mark Hughes: But they're obviously working, and wages and payroll, and shared payrolls are going up. So I think that speaks positively for our industry groups. Great.

Speaker Change: But they're obviously working and wages and payroll, insured payrolls are going up. So I think that speaks positively for our industry groups.

Mark Hughes: Thank you very much.

Operator: Thank you, Mark.

Speaker Change: Great. Thank you very much.

Mark Douglas Hughes: Thank you, Mark.

Operator: Again, if anyone would like to ask a question, please press door one on your telephone keypad.

Gregory Peters: Again, if anyone would like to ask a question, please press star 1 on your telephone keypad. Our next question is coming from Gregory Peters with Raymond James.

Speaker Change: Again, if anyone would like to ask a question, please press star 1 on your telephone keypad. Our next question is coming from Gregory Peters with Raymond James.

Gregory Peters: Our next question is coming from Gregory Peters with Raymond James. Good morning, everyone. Good morning, Greg. Good morning.

Gregory Peters: Good morning everyone. I was looking at the six-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.

Gregory Peters: I was looking at the six-month result on the expense ratio. versus last year, and it's up a little bit, 90 basis points. Just curious if there's anything structural that's going on driving that expense ratio higher.

Gregory Peters: Good morning everyone. Hey, I was looking at the six-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...

Gregory Peters: structural that's going on driving that expense ratio higher.

Janelle Frost: Greg, how are you? The growth that you're seeing in the expenses for this six months is really just further investing in the sales side underwriting, just the firm of the house. Again, based on the fact that expenses are never linear either, the investment is probably more upfront now in these first six 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.

Gerry Janelle Frost: Greg, how are you? The growth that you're seeing in the expenses for this six months is really just further investing in, you know, the sales side, underwriting just the front of the house. But again, based on the fact that, you know, expenses are never linear either, the investment is probably more up front now in these first six months, and then it should, you know, level off, and then we assume it to be back in what the range is for us for an annual expense ratio.

Speaker Change: Greg, how are you?

Speaker Change: The growth that you're seeing in the expenses for this for the six months is really just further investing in, you know, the sales side.

Greg: underwriting just the front of the house but again based on the fact that you know expenses are never linear either you know the investment is

Greg: is probably more up front now in these first six 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.

Janelle Frost: Okay, and then just pivoting back to the growth comment. Janelle, I thought you said in the comment and the call at EU Policy Count growth has been positive for the last five consecutive quarters. I don't want to misquote you, but has there been concentrated with certain distribution partners or certain geographies, or maybe you can give us some color where the growth is coming from? Yeah, 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, and 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 age that we can serve best.

Gregory Peters: Okay, and then just pivoting back to the growth comment, Janelle, I thought you said in the comment and on the call that policy account growth has been positive for the last five consecutive quarters. I don't want to misquote you, but has it been concentrated with certain distribution partners or certain geographies, or maybe you can give us some color of where the growth is coming from?

Greg: Okay, and then just pivoting back to the growth comment, Janelle, I thought you said in the comment and the call, the policy account growth is...

Speaker Change: positive for the last five consecutive quarters. I don't want to misquote you.

Speaker Change: Has it been concentrated with certain distribution partners or certain geographies, or maybe you can give us some color of where the growth is coming from?

Gerry Janelle Frost: Yeah, great question. And the answer is no; it's not coming from a particular distribution network.

Gerry Janelle Frost: Yeah, 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.

Gregory Peters: As you know, we use independent agents. That hasn't changed. Actually, if you look at our agent counts, they're probably slightly down. And 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 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.

Gerry Janelle Frost: Actually, if you look at our agent counts, they're probably slightly down, and 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 in the age that we can serve best.

Janelle Frost: 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.

Gregory Peters: 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. Nothing, nothing, and 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 at the way we're handling our agency relations.

Gerry Janelle Frost: So, that's been a very positive thing for us. The policy growth has really been...

Gerry Janelle Frost: 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.

Gerry Janelle Frost: 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

Janelle Frost: It's not particular to an industry group. It's not particular to a certain type or particular agency distribution. Nothing, nothing, and 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 at the way we're handling our agency relationships.

Gerry Janelle Frost: 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.

Gerry Janelle Frost: Nothing, nothing, and 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 at the way we're handling our agency relationships.

Gregory Peters: And 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 of other calls. And so I'm just curious, as we look forward, what you think about how are you measuring out or engaging what your outlook is on severity? Right, that's, yeah, so Florida is certainly top of mind for everyone because they made adjustments to both physician charges and surgical procedures, and that seems to be the two that everyone's talking about.

Gregory Peters: And I'm going to come back to the severity question again. I know you addressed it in your previous answers, but on some of the other conference calls, you know, the concept, the fact that Florida has raised its reimbursement schedules, Medicare reimbursement schedules, beginning next year. That's come up on a couple other calls. And so I'm just curious, you know, as we look ahead, what you think about it, how are you measuring up? For gauging what your outlook is on severity.

Speaker Change: And 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, you know, the concept, the fact that Florida has

Speaker Change: raised its reimbursement schedules, Medicare reimbursement rate schedules beginning next year. That's come up in a couple other calls, and so I'm just curious, you know, as we look forward, what you think about, how are you measuring out?

Gerry Janelle Frost: So Florida is certainly top of mind for everyone because they've made adjustments to both physician charges and surgical procedures, and those seem to be the two that everyone's talking about. Because when you look at the percentage increases, you think, wow, that's pretty significant.

Speaker Change: or gauging what your outlook is on severity.

Speaker Change: Right, Florida is certainly top of mind for everyone because they've made adjustments to both

Speaker Change: Physician Charges and Surgical Procedures, and that seems to be the two that everyone's talking about. Because when you look at the percentage increases, you think, wow, that's pretty significant. I believe a couple things about that.

Janelle Frost: Because when you look at the percentages increases, you think, wow, that's pretty significant. I believe a couple of things about that. Those are the kinds of things that I mentioned when I was talking earlier about medical inflation and things were keeping our eyes on. That's exactly the kind of things that we're talking about. And 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 cost as well. So even it's not a dollar for dollar in terms of oh the reimbursement rates gone up from 100% 110% to 175% for physician services.

Gerry Janelle Frost: I believe a couple of things about that. Those are the kinds of things that I mentioned when I was talking earlier about medical inflation and things we're keeping our eyes on. 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.

Speaker Change: Those are the kinds of things that I mentioned when I was talking earlier about medical inflation and things we're keeping our eyes on.

Speaker Change: 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.

Speaker Change: within each state that work on

Gerry Janelle Frost: So even though it's not dollar for dollar in terms of, oh, the reimbursement rate's 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. So it's not dollar for dollar. So that's one caveat.

Speaker Change: containing cost as well. So even, it's not dollar for dollar in terms of, oh, the reimbursement rate's gone up from 100%, 110% to 175% for physician services. We also have to keep in mind that we have other cost savings.

Janelle Frost: We also have to keep in mind that we have other costs of savings mechanisms on top of that within our provider networks and those types of things. So 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 our how our model works so efficiently because my claims of gestures are experts in their field. And they are wholly focused on the workers' compensation reserve because we're a monoline carrier.

Speaker Change: mechanisms on top of that within our provider networks and those type of things. So it's not dollar for dollar.

Gregory Peters: 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, really speaks to our how our model works so efficiently. Because my claims adjusters are experts in their fields, and they are wholly focused on the workers' compensation reserve because we're a monoline 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 Change: 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,

Speaker Change: really speaks to how our model works so efficiently. Because my claims adjusters are experts in their fields,

Speaker Change: And they are wholly focused on the workers' compensation reserve because we're a monoline carrier. A, they're very attuned to what's happening in terms of their individual states.

Janelle Frost: 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. So we're not, it's not playing out over a long period of time in terms of Amerisafe's lost 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 and 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 costs live and reflecting that in our individual rates.

Speaker Change: and reflecting that in our initial reserves really, really quickly so it's not playing out over a long period of time in terms of Amerisafe loss experience. We're building that into our initial case reserves whenever that accident happens.

Gregory Peters: So we're not playing out over a long period of time in terms of Amerisafe's loss experience. We're building that into our initial case reserves whenever that accident happens. That's important to us in terms of severity and our recognition of 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 costs in real time and reflecting that in our individual rates. That was a very long answer to your severity question. Excellent. Well, thank you both for the detail.

Speaker Change: That's important to us in terms of the severity.

Speaker Change: 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 costs.

Speaker Change: live, and reflecting that in our individual rate.

Gregory Peters: That was a very long answer to your severity question.

Gregory Peters: Excellent. Well, thank you both for the detailed answers.

Gregory Peters: Excellent.

Speaker Change: That was a very long answer to your severity question. Excellent. Well, thank you both for the detailed answers.

Bob Fornham: Well, thank you both for the detailed answers.

Bob Fornham: You're welcome. And our final question is coming from Bob Fornham with Jamie. Your line's open. Hi there, good morning. I've got more of a philosophical question. I'm thinking of the lost cost, and they keep going down. And I'm wondering what it is going to take or what the market conditions going to look like to have the lost cost bottom out. And how much of a lag will there be for the actual filings to catch up with the actual need to start raising rates? Yeah, great question. So what's it going to take? As I mentioned earlier, that accident year combined ratio for the industry continuing to tick up and eventually break 100. That will, at least I believe, flow the bleeding in terms of the rate decreases because then accident years will not be considered profitable.

Speaker Change: You're welcome.

Robert Edward Farnam: And our final question is coming from Bob Farnam with Janie. Your line is open.

Speaker Change: And our final question is coming from Bob Farnam with Janie. Your line is open.

Robert Edward Farnam: Hi there, good morning. I've got more of a philosophical question. I'm thinking of the lost cause, and they keep going down. And I'm wondering what it is going to take or what the market conditions are gonna look like to have the lost cost bottom out. And how much of a lag will there be for the actual filings to catch up with the actual need to start raising funds?

Robert Edward Farnam: Hi there, good morning. I've got more of a philosophical question. I'm thinking of the lost 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

Speaker Change: to have the lost cost bottom out.

Speaker Change: And how much of a lag will there be for the actual filings to catch up with the actual need to start raising rates?

Robert Edward Farnam: Yeah, great question. So what's it going to take?

Speaker Change: Yeah, great question. So what's it going to take? As I mentioned earlier, that accident 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.

Gerry Janelle Frost: As I mentioned earlier, that accident year combined ratio for the industry continues 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 again, using Florida as an example, typically, when there's a major change going on, and I'll use Florida as an example since it's an NCCI state, NCCI will take those costs and try to figure out, well, what's that actually going to cost the industry?

Janelle Frost: 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. NCCI 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 there's something change in the law that needs to be reflected in the rate, and that should theoretically happen.

Speaker Change: To your point about the these changes and using again using Florida as an example typically what happens when there's a major change going on some

Speaker Change: and I'll use Florida as an example since it's an NCCI state. NCCI will take those costs and try to figure out what's that actually going to cost the industry.

Gerry Janelle Frost: And even if it's off-cycle from a normal rate filing, because each state has its own rate filing dates, they can make 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. Then I would assume carriers within their Florida, within Florida, would try to, within their own pricing, of course, Florida's an administrative pricing state, so it's a little tricky, but through their own competitive methods, so 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.

Speaker Change: 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...

Janelle Frost: 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, so forget if the underlying loss cost was used as an example, Florida didn'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 pricing state, just 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 a lost cost side.

Speaker Change: Theoretically, it happened, 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. So forget if the underlying loss cost, let's use, let's say an example.

Speaker Change: 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's an administrative pricing state, so it's a little tricky.

Speaker Change: 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 lost cost side.

Janelle Frost: I believe that pressure will continue, and we're going to see more and more examples of that, which hopefully will flow the rate of decline or even flatten out the declines and approved loss costs. Because I think those pressures are going to continue to happen. For the very reason I was speaking up earlier, physicians have an operating model for which they have a profit margin that they're trying to. and if they're getting reimbursed by workers' compensation for something less than that, there's going to be either a shortage of providers; in 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.

Gerry Janelle Frost: I believe that pressure will continue, and we're going to see more and more examples of that, which hopefully will slow the rate of decline or even flatten out the declines in approved lawsuits. 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... And if they're getting reimbursed by workers' compensation for something less than that, there's going to be either a shortage of providers, or they're going to say, you know what? I don't want your workers' compensation, or there's going to have to be.

Speaker Change: I believe that pressure will continue and we're going to see more and more examples of that, which hopefully will slow the rate of decline or even flatten out the declines in approved loss costs.

Speaker Change: 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 meet.

Speaker Change: And if they're getting reimbursed by workers' compensation for something less than that, there's going to be either a shortage of providers, in other words, they're going to say, you know what, I don't want your workers' compensation patient, or there's going to have to be some adjustment to the pricing.

Bob Fornham: Right. So, I mean, it sounds like, yeah, despite the fact that the 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're getting more rate there. Is there a, 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? Yeah, that's a really great way to look at it. If I try to rephrase that, how low would I let my retention go?

Robert Edward Farnam: Right. So, I mean, it sounds like, yeah, despite the fact that loss costs are going down, the fact that even just this quarter, you know, and for example, your ELCM increase. It's kind of taking away some of that lost cost pressure just because you are getting more rate there. Is there a... 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 Change: Right, so, I mean, it sounds like, yeah, despite the fact that loss costs are going down, the fact that even just this quarter, you know, and for example, your ELCM increased.

Speaker Change: It's kind of taking away some of that lost cost pressure just because you are getting more rate there. Is there a...

Speaker Change: 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?

Gerry Janelle Frost: That's a really great way to look at it. If I try to rephrase that, how low would I let my retention go?

Speaker Change: That's a really great way to look at it.

Robert Edward Farnam: You know, that's a great question. We've always had really strong retention numbers simply because we know that 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 in Amerisafe's case, not only do we know the account really well, but we've been providing safety services to that account, so we know what their attitude towards safety is.

Speaker Change: If I try to rephrase that, how low would I let my retention go? I don't know. You know, that's a great question. We've always had really strong retention numbers simply because...

Janelle Frost: I don't know. You know, that's a great question. We've always had really strong retention numbers, simply because 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 in a merit 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. Do 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?

Speaker Change: 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.

Speaker Change: And in Amerisafe's 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.

Robert Edward Farnam: So retention is extremely important to us. Do we test the market, or do we think about when we do know, hey, we have to underwrite something at a profitable level, and that's going to affect our retention? Yes, we pay attention.

Speaker Change: So, retention is extremely important to us. Do we test the market or do we think about when we do know, hey, we have to underwrite something at a profitable level and that's going to affect our retention?

Bob Fornham: Yes, we pay attention, but I will say underwriting profit above all other things. Right, 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 that I was just curious, you know, as you hopefully start to tweak your ELCM up. You know, I just want to make sure your retention stays where it is. Absolutely, absolutely. And everything I'll say is about rates. I haven't. I think I've really talked about it on this call, Bob. One of the things we have to consider is the fact that, you know, wage inflation has been really strong for over a year now, and it's starting to weigh in a little bit, but it's still, you know, 6% is nothing to balk at.

Speaker Change: Yes, we pay attention, but I will say, underwriting profit above all other things.

Robert Edward Farnam: Right, 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, you know, as you hopefully start to tweak your ELCM. I just want to make sure your retention stays where it is.

Speaker Change: Right, 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, you know, as you hopefully start to tweak your ELCM up.

Gerry Janelle Frost: Absolutely. And the other thing I'll say about rates, 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, you know, wage inflation has been really strong for over a year now, and it's starting to wane a little bit, but it's still, you know, 6% is nothing to balk at. And that, in some ways, has effectively acted as a rate, for lack of a better term, right, if you have the same employees, but they're making It sort of, you know, helped bridge the gap a little bit in terms of the approved loss cost decline. All right, all right. Okay.

Speaker Change: You know, I just want to make sure your retention stays where it is.

Speaker Change: Absolutely, absolutely. And the other thing I'll say this about race, 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, you know,

Speaker Change: Wage inflation has been really strong for...

Speaker Change: Over a year now, and it's starting to wane a little bit, but it's still, you know, 6% is nothing to balk at.

Operator: 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. It's sort of, you know, help bridge the gap a little bit in terms of the approved loss cost declines. All right, all right. Okay, well thanks for all the colors. Thank you.

Speaker Change: 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, it sort of, you know, helped bridge the gap a little bit in terms of the approved loss cost declines.

Robert Edward Farnam: Thanks for all the color.

Speaker Change: All right, all right. Okay, we'll do it. Thanks for all the color.

Speaker Change: Thank you.

Operator: There are no further questions at this time.

Operator: There are no further questions at this time. I will now turn the conference over to Janelle Frost, CEO, for any additional or closing remarks.

Janelle Frost: I will now turn the conference over to Janelle Frost, CEO, for any additional or closing remarks. I'd like to highlight Marissa's inclusion in the Ward 50 Top Performing Property and Casualty Companies 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 stakeholders.

Speaker Change: There are no further questions at this time. I will now turn the conference over to Janelle Frost, CEO , for any additional or closing remarks.

Gerry Janelle Frost: I'd like to highlight Amerisafe's inclusion in the award's 50 top-performing property and casualty companies for the 16th consecutive year. This recognition underlies our employees' ability to use their expertise in the 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.

Gerry Janelle Frost: I'd like to highlight Amerisafe's inclusion in the Ward 50

Gerry Janelle Frost: top-performing property and casualty companies for the 16th consecutive year.

Gerry Janelle Frost: 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.

Janelle Frost: Congratulations to Marissa's team, and thank you for joining us today.

Operator: This concludes today's call. Thank you for your participation. You may now disconnect.

Janelle Frost: This concludes today's call. Thank you for your participation.

Speaker Change: This concludes today's call. Thank you for your participation. You may now disconnect.

Operator: You may now disconnect.