Q4 2024 AMERISAFE Inc Earnings Call
Good day and welcome to the Amerisafe fourth quarter 2024 earnings call Today's conference is being recorded.
Speaker Change: Last time relates to turn the conference over to MS. Kathryn Shirley. Please go ahead ma'am.
Speaker Change: Good morning, welcome to the Amerisafe 'twenty 'twenty four fourth quarter Investor call. If you've not received the earnings release. It is available on our website at Amerisafe Dot com.
Speaker Change: 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.
Speaker Change: During this call we will be making forward looking statements.
Speaker Change: 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 if the underlying assumptions prove to be incorrect or as a result of risks uncertainties and other factors, including factors discussed in the earnings release and the comments made during today's call and in the risk factors section of our Form 10-K Form 10-Q.
Speaker Change: <unk> 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 GNL Frost Amerisafe President and CEO.
GNL Frost: Thank you Catherine and good morning, everyone. We are pleased to share Amerisafe results for both the fourth quarter and the full year of 2024.
Speaker Change: A key priority throughout the year has been topline growth with consistent underwriting margin, which is reflected in our gross premiums written increased three 9% for the fourth quarter and three 1% for the full year.
Speaker Change: Voluntary premiums on policies written rose by eight 5% in the fourth quarter and four 6% for the year compared to 2023, while our in force policy Count grew nine 6%.
Speaker Change: Strong premium retention and robust new business production were the primary drivers for this growth.
Speaker Change: Underscoring our commitment to profitable growth and the competitive landscape.
Speaker Change: Despite industry wide headwinds, including rate reductions and decline in wage inflation, our ability to identify and capitalize unprofitable opportunities is a testament to the expertise and collaboration of our team.
Speaker Change: We are improving our agent relationships protecting our policy holders and caring for injured workers.
Speaker Change: Our focus led to a combined.
Speaker Change: Ratio of 88, 7% and an ROE of 22%.
Speaker Change: This success is a direct result of collaboration across the organization and the empowerment of our employees to foster a sales driven culture.
Frontline teams or underwriting sales in safety back in support of claims and premium audit and operational functions such as regulatory I T and finance every department played a role in driving growth.
Speaker Change: Our employees have embraced the challenge of competing in a dynamic P&C market, where workers compensation is aligned.
Speaker Change: Line remains attractive to carriers.
Speaker Change: For the full year, our accident year loss ratio remained steady at 71% consistent with the prior year and we anticipate maintaining that level in 2025.
Speaker Change: Additionally, we recognized favorable development from prior accident years of $9 7 million in the quarter and $34 9 million for the full year of 2024.
On capital management front Amerisafe squared of directors has approved a five 4% increase in our regular dividend to <unk> 39 per share.
Speaker Change: Looking ahead, we remain focused on top line growth confident that our ability to identify and ensure a profitable high risk high hazard risks will continue to offset broader market challenges with.
Speaker Change: 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. Thank you Jill and good morning to everyone for the fourth quarter of 2020 for Amerisafe reported net income of $13 2 million or <unk>.
Speaker Change: <unk> per diluted share and operating net income of $12 8 million or <unk> 67 cents per diluted share during the fourth quarter of 2023 net income was $19 2 million or $1 per diluted share and operating net income of $14 3 million or <unk> 74 cents per diluted share the lower net income.
Speaker Change: Primarily driven by lower net unrealized gains on equity securities for.
Speaker Change: For the full year net income was $55 4 million and net operating income was $48 4 million compared with $62 1 million and $55 9 million respectively in 2023.
Speaker Change: Gross written premiums were $62 7 million in the quarter and $294 1 million for the year growing three 9% and 3% respectively. Net premiums earned were 65, $66 5 million in the quarter and $270 6 million for the year growing one 2% one 3% respectively.
Speaker Change: Overall strong premium retention and new business production were the primary drivers of top line growth for both the quarter and year, reflecting an organizational focus on growing profitable sales despite competitive market conditions.
Speaker Change: Our total underwriting and other expenses were $19 8 million in the quarter, a 4% increase compared with $19 million recognized in the fourth quarter of 2023. This increase resulted in an expense ratio of 29, 7% compared with 28, 9% in the fourth quarter of 2023, the increase was primary.
Speaker Change: 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 three in 2023.
Speaker Change: For the year, our tax rate was 19, 7% unchanged from the prior year.
Speaker Change: Turning to our investment portfolio for the fourth quarter and full year net investment net investment income decreased 14, 4% to $6 9 million and six 8% to $29 $2 million respectively. This.
Speaker Change: This was due to the decrease in investable assets following the payment of the special dividend in December.
Speaker Change: For the quarter the yield on new investments increased approximately 42 basis points driving our tax equivalent book yield to three 8% or 11 basis points higher than the fourth quarter of 2023.
Speaker Change: Realized losses for the portfolio of Securities sold worse.
Speaker Change: $400000 in the quarter compared with a gain of $1 million during the fourth quarter of 2023.
Speaker Change: The investment portfolio is high quality carrying an average double a minus credit rating with a duration of four 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.
Speaker Change: <unk>.
Speaker Change: Approximately 56% of our bond portfolio is comprised of held to maturity securities and due to the notable increase in rates during the quarter. The net unrealized loss was $13 3 million at quarter end.
Speaker Change: As a reminder, these held to maturity securities are carried at amortized cost and therefore unrealized gains or losses on the securities are not reflected in our book value.
Speaker Change: Yeah.
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 $830 million in investments cash and cash equivalents and finally, just a couple of other topics.
Speaker Change: 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-K.
Speaker Change: With the SEC Tomorrow February 28, after the market close.
Speaker Change: With that I would like to open the call for the question and answer portion of the call operator.
Speaker Change: Matthew I'd like to ask a question please press.
Speaker Change: 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.
Speaker Change: Once again that is star one if you would like to ask a question.
Moderator: We will now take a question from Mark Hughes with choice.
Mark Hughes: Yeah. Thanks, good morning.
Mark Hughes: I would like to know the policy count growth I think you said nine 6% could you put that in the context of what you.
Mark Hughes: <unk> experienced in recent quarters.
Mark Hughes: And could you also talk about what the.
Mark Hughes: Average size per policy has been how that has trended over the last few quarters.
Mark Hughes: Great well I believe mark of nine 6% that I quoted was for the year that's on it.
Mark Hughes: It's not just the quarter so that was for the entire year.
Mark Hughes: And how does that <unk>.
Mark Hughes: I'm sorry go.
Mark Hughes: Oh I was going to.
Mark Hughes: I'm sorry to interrupt.
Mark Hughes: How is that in the fourth quarter.
Amit: Great question I don't have that in front of me actually Amit.
Mark Hughes: The year to date.
Mark Hughes: I guess the year over year nine six points.
Mark Hughes: Perfect.
Mark Hughes: Yes policy count growth in the fourth quarter was two 6%.
Mark Hughes: Okay.
Mark Hughes: And Thats a sequential number.
Mark Hughes: Yes.
Mark Hughes: Okay.
Speaker Change: Very good and then sorry for interrupting that you were saying I think I had asked about size as well.
Speaker Change: Yeah. So the size of policy you know our average policy size for 2024 was slightly lower than 2023.
Speaker Change: Still holding strong, we're certainly where were boosted by stronger payrolls.
Speaker Change: Coming into the year, we knew that going into 2024.
Speaker Change: We were seeing payroll growth.
Speaker Change: In the fourth quarter, we saw some slowing in terms of average wages. If you recall the last part of the first three quarters of 2024, we were seeing somewhere around 7% each quarter it dropped to 4% and a fourth quarter of 2024, not a complete surprise obviously.
Speaker Change: Well, we were trending higher than national averages and now we're starting to see some moderation there.
Speaker Change: Okay.
Speaker Change: The Ah.
Speaker Change: Renewal rate.
Speaker Change: <unk>.
Speaker Change: The pricing measures it shall not be named.
Speaker Change: We don't.
Speaker Change: We don't have that which is perfectly fine.
Speaker Change: But generally speaking this quarter I think you had undertaken a strategy of <unk>.
Speaker Change:
Speaker Change: Being a little more active on renewal rate was that a contributor this quarter or is that kind of run its course or how much was that an impact on the top line.
Speaker Change: Alright.
Speaker Change: Yes, it certainly was impactful to the quarter into the full year actually but you know for the quarter. Our policy retention was 94, 1% on a policy basis on a premium basis and 88%.
Speaker Change: So strong renewals.
Speaker Change: Sure.
Speaker Change: And then your reserve gains you I think you had had some gains from 2022 earlier in the year and you.
Speaker Change: Right.
Speaker Change: This quarter also reserve gains from older accident years, including 2022 any observations about the post COVID-19 years 'twenty, one 'twenty, two just kind of how they're shaping up.
Speaker Change: Yeah, they're they're those are those are going to be good accident years.
Speaker Change: Nine 7% favorable development.
Speaker Change: Not present $9 7 million of favorable development, we had this quarter.
Speaker Change: That was from 20 to $1 5 million from 21, $1 6 million from 20, and then 2019 and prior I was $5 6 million.
Speaker Change: So we're obviously seeing even from the more green years, we're seeing favorable case development come out of those accident years.
Speaker Change: Yeah.
Speaker Change: No.
Speaker Change: One more of the ceded premium.
Speaker Change: Was a little elevated in this quarter I think you're a little higher in the fourth quarter of last year, but even compared to that.
Speaker Change: Year over year.
Speaker Change: If we think about I guess number one why was that and then number two.
Speaker Change: For 2025 should it be kind of back in the.
Speaker Change: Yes.
Speaker Change: It is around 6% normally of gross premiums written.
Speaker Change: Okay.
Speaker Change: Mark It's Andy and good morning to you. So you are right. The question wasn't quite a bit higher I think thats because of the growth that we saw in the quarter and of course in Q4.
Speaker Change: We always go back and make sure that if there's any true up needed that's done but overall, it's really based on the growth that we're seeing.
Speaker Change: In the policy count come through voluntary deck and you can just.
Speaker Change: As far as 2025, I think it's fair to say that.
Speaker Change: Every quarter isn't linear so I think the 6% you are saying is probably correct, but its right around that number.
Speaker Change: Yes, okay.
Speaker Change: Very good I had a couple more but I'll jump back in the queue. Thank you.
GNL Frost: Thank you Mark.
Speaker Change: As a reminder that is star one if you would like to ask a question.
Speaker Change: Well now take a question from Matt <unk> with citizens JMP.
Matt: Thanks, Good morning.
Speaker Change: Good morning, Matt.
Speaker Change: Our first question is.
Speaker Change: I mean, you talked a bit about what we are seeing the voluntary growth really pick up kind of back half of the year and I think we've talked a bit about how that's been pretty intentional.
Speaker Change: Kind of interacting with your agencies.
Speaker Change: Trying to be easier to do business with and one of the aspects you.
Speaker Change: You pointed to I think last call was kind of the idea of like.
Speaker Change: Getting them just to not think of you as like the roofing company and that you're right other high hazard.
Speaker Change: Kind of class codes and things like that have you seen that in the growth that comes through that that there is an expanded kind of maybe appetite by the agency in that.
Speaker Change: Certain cases, you might've been pigeonholed to a particular type of risk and that is broad I think that's driving the growth or is it or is it something else.
Speaker Change: Well as there is a great question, we certainly have to your point really hasnt been making sure our agency base understand a the value proposition of Amerisafe.
Speaker Change: <unk> claims terrific and then two what our appetite is so making sure that that is easily accessible to our agents both through our TSM and both through digital platforms as well.
Speaker Change: At Macy's.
Speaker Change: Excuse me getting our TSS and front end agents are reiterating you know what do you have in Europe, and your book, Mr agent and that fits in Amerisafe as risk appetite and give us an opportunity to the question too is that attributed to our growth I would say, yes can I put percentages around that probably no.
Speaker Change: 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, increasing the number of agents that have a bind with us those are two numbers internally that we're really focused on.
Speaker Change: So driving driving home the appetite as part of that equation certainly.
Speaker Change: Okay, Perfect and then second question.
Speaker Change: Got it latter part of last year.
Speaker Change: A couple of Hurricanes came through.
Speaker Change: Areas of the country that you have a lot of business.
Speaker Change: Have you seen.
Speaker Change: Any I guess any of the growth we saw in Q4 kind of been a result of kind of that that reconstruction. If you will.
Speaker Change: Or would you expect.
Speaker Change: To see any of that maybe as we go forward I know it can take time for that to come through.
Speaker Change: Yes.
Speaker Change: You're right, Matt It does take time.
Speaker Change: It certainly hasn't started been audit premium yet because obviously, we haven't audited those policies that would've been affected during those time periods. We do look at the monthly reporting that our policyholders are our Sydney.
Speaker Change: Sydney into us and we.
Speaker Change: Seen some a little bit of increase if I look at Florida, Georgia, and the Carolinas, but nothing that I can point to and say, yes, that's definitely hurricane related business.
It's more normal course of business. So I don't know that I can quantify if any of that.
Speaker Change: Tequila to storms.
Speaker Change: Okay, great. Thank you very much for the color I appreciate it.
Matt: Thank you Matt.
Once again that is star one if you would like to ask a question.
Speaker Change: Well now take a question from Bob <unk> with Janney.
Speaker Change: Hey, there good morning.
Speaker Change: Just like to maybe expand a little bit on Matt's question about the kind of the the expansion to new business and I. Just wanted to know are you are you looking at adding additional class codes as you're expanding or are you really just focusing on the stuff that you already right.
Speaker Change: We are focusing on things that we already right.
Speaker Change: If I talk about it in terms of hazard groups, you know atg.
Speaker Change: We specialize in E F and G and still over 80% of our in force policies are E F and G. So even with our new business growth that is our focus area. We haven't added necessarily classes of business is really about penetrating the markets that we're in and being more effective about that.
Speaker Change: Okay.
Speaker Change: What I thought.
Speaker Change: And then just kind of a qualitative view on reserves.
Speaker Change: How much of your kind of open claim inventory is related to claims that are that are 10 years or older I'm trying to get an idea of kind of how how long claims can stay open.
Speaker Change: And just kind of what the average duration of your liabilities is kind of what I'm getting at.
Speaker Change: 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-K, you know where we have 2023 and 2020 that goes into the group prior to 2019 prior to 2019 I would say 99% of the claims that were reported you guys are closed so very small percent open.
Speaker Change: And some are open for yes, there are some states that we can't technically close the claims as perfect medical reasons and so they are open for medical we're done with the indemnity portion of the claim yes, 99% of those claims.
They are closed for those for that prior to 2019.
Speaker Change: Okay.
Speaker Change: So it sounds like relative to the overall workers' comp industry Youre claims closures.
Speaker Change: It seemed to be more quick than maybe the average for the industry is that accurate I believe that I believe so and I totally give the credit to my claims organization. It is definitely in the way that Amerisafe handled claims.
Speaker Change: We still use we call the good old fashion claims adjusting we meet with people. We take written statements. We manage those claims intensely and we keep those low inventories Parkville case manager I can't.
Speaker Change: Is that enough.
Speaker Change: I know that that is unique to amerisafe on average across many dual case managers on average they have less than 50 claims per adjusted when.
Speaker Change: When you think about that they are really they really have the opportunity to make a difference in these claims no. These claims and thats how were able to close them and find resolution getting maximum medical improvement return those injured workers to work as quickly as we can because they they have the opportunity and the means to which to close those claims.
Speaker Change: Great Alright, thanks, Thanks for the answers.
Bob: Thank you Bob.
Speaker Change: And once again that is star one if you would like to ask a question. We will now take a follow up from Mark Hughes with truest.
Bob: Yes. Thanks.
You talked about the payroll one of the concepts.
Bob: Come up from time to time as kind of the next job in construction do you have any view on the construction industry and the prospects there.
Bob: You know look I feel I mean this is the world. According to US now, but you know my opinion is is that at least for our insured base. The economy seems to be supporting their work pretty well I mean, we're still seeing strong payroll growth there.
Bob: We are finding opportunities.
Bob: We think about all the things 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 can mean, the construction as a whole I know people talk about steel and those types of things.
Bob: 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 somewhat insulated I wouldn't think immigration again, a question that we've been asked about particularly regarding our.
Bob: Our construction and agriculture book.
Bob: For Amerisafe.
Bob: Have we are quantifying from from the premium side of things how many of our workers are non documented workers.
Bob: But certainly we know from a claims perspective, we do have injured workers that are non document it workers, but from a claims perspective there.
Bob: They they they are entitled to the same benefits every other workers entitled to.
Bob: If I if I play that through in my mind what happens.
Bob: For non document and workers, particularly in our construction book, our agriculture book.
Bob: Could it be influential to the labor force perhaps.
Bob: But again these are small to midsize employers so even if it is influential in terms of maybe less.
Speaker Change: Resilient Labor force.
Speaker Change: <unk> also could lead to higher wages, if those jobs are replaced.
Speaker Change: With documented workers.
Speaker Change: So headline why those are the things I think about in terms of our industries.
Speaker Change: Fans of the economy as it as it as it stands but as of right. Now obviously these things change every day, but as of right now I feel pretty strongly that our construction book and even our entire book is.
Speaker Change: <unk> has a bright future for 2025.
Speaker Change: Yeah.
Speaker Change: But the large claims for the year.
Speaker Change: Yeah. So.
Youre going to laugh when I say this is Martin.
Speaker Change: It's been awhile since I've had to use this word but it is lumpy.
Speaker Change: We ended the year with 18 claims.
Speaker Change: Over $1 million and when you look comparatively to 2023, which was a record year in terms of.
Speaker Change: So number nine is there.
Speaker Change: I harken back to my lumpy word 18 is not that unusual as I look at the five year average of where we were at 12 months, because obviously claims develop after an accident at the end of an accident year, but if I look at the five year average I E. At 12 months, we average around 15 to 18 is not too.
Speaker Change: Far off of the average, but compared to 2023 that number is 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.
Speaker Change: That much of a frequency or severity. It's just there were 18 claims.
Speaker Change: Look at how they occurred or what industries they incurred in it very much mirrors, our book of business and even the types of injuries have they 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.
Speaker Change: For those larger claims and that's true for 'twenty four.
Speaker Change: Yes, Okay, there's anything on the medical inflation front.
Speaker Change: Either from costs or ability to access certain services in case of.
Speaker Change: Lack of capacity because reimbursement rates are too low.
Speaker Change: Any changes there you've noted.
No real development than what we've shared over the last couple of quarters home health is still probably the one.
Speaker Change: I'll 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.
Speaker Change: So we certainly are paying attention to that but nothing new other than that then those things are in terms of reimbursement rate no.
Speaker Change: No. We certainly are monitoring the loss costs are the rates that are being approved by the states and how that could or could not be impactful to us, but theres. Its been a wide range. If you look at the loss costs that had been approved for one one are the ones that we know about for 2025 at this point I think the high is a 19%.
Speaker Change: The decrease in Maine, and the are the I'd say the high the low the decrease and then in the largest increase I think we've seen a six 5% in Nevada, but theres a wide range there and the loss costs that are being approved so.
Speaker Change: How medical cost influence or how the reimbursement rates will influence that on a go forward basis Tiger time will tell but I don't I can't think of anything in those rate filings that were specific to a medical fee schedule is being adjusted to the degree that it was a highlight in the rate filing I don't I don't recall that.
Speaker Change: Been more just experience.
Speaker Change: Yeah did you.
Speaker Change: Have you averaged up the rate filings if you look at the recent trend in the past.
Speaker Change: Yes, the average member.
Speaker Change: Yes.
Speaker Change: I don't think I'd say this but it's a decrease.
Speaker Change: And somewhere around the mid single digit range.
Speaker Change: Yeah.
Speaker Change: It really does.
Speaker Change: How is that mid year or this time last year.
Speaker Change: So for 'twenty. That's a good point in 2023 were a little 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.
Speaker Change: Yes.
Speaker Change: Great.
Speaker Change: Ever so slight improvement if you're trying to get me to give you a great news about rates there you go.
Speaker Change: Hey, it's an inflection.
Speaker Change: Okay.
Speaker Change: Yes, yes.
Speaker Change: Yeah.
Speaker Change: And then.
Speaker Change: Anything on the audit.
Speaker Change: <unk>.
Speaker Change: We're doing just kind of progressing through that earlier period of wage inflation and so.
Speaker Change: As you do the audits on a look back at kind of naturally a tapering is that a way to think about it.
Speaker Change:
Speaker Change: Maybe the audits.
Speaker Change: Naturally from a macro perspective.
Speaker Change: Got you.
Speaker Change: You'll see a deceleration there.
Speaker Change: Yeah, I believe we will see a decent deceleration or a moderation.
Speaker Change: I don't see again looking forward to 'twenty two five based on what I know today.
Speaker Change: I don't see audit premium turning negative I think it still remains positive I E. The.
Speaker Change: The new employee count has still been averaging between that one and 2%.
Speaker Change: Things that we've been seeing each quarter and then there's been wage inflation I don't I don't think there is I don't foresee that flipping to be negative, but certainly the year over year comparisons get tougher.
Speaker Change: Get tougher and tougher and there'll be a deceleration from that standpoint, but standalone audit premium I believe will still remain positive in 2025.
Speaker Change: And then any instances of any competitors getting.
Speaker Change: More aggressive.
Speaker Change: Our workers comp premium.
Speaker Change: It seems like you're holding your own and then Tom in terms of policy count.
Speaker Change: Premium growth. So you would know it by looking at it in that sense, but I'm just sort of curious whether you've seen any changes.
Speaker Change: It is very competitive mark that's a change probably not.
Speaker Change: But as.
Speaker Change: As the other P&C lines have not yet rectified their issues in terms of overall results workers' compensation remains attractive.
Speaker Change: So as long as the.
Speaker Change: The combined ratios for the industry remain attractive we will have competitors and we will have competitors you know dipping into the high hazard space.
Speaker Change: But that's a reality that we are prepared to face.
Speaker Change: Yeah, I would zipping into the high hazard is probably.
Speaker Change: Bad bad approach.
Speaker Change: Well, yes, as Youre asking me for advice, yes, I would say that.
Speaker Change: Oh.
Speaker Change: That's super dangerous do you need to stay away.
Speaker Change: Any early thoughts on loss pick for 2025.
Speaker Change: Yeah.
Speaker Change: As of right now I believe we're going to hold at 71.
Speaker Change: Okay.
Speaker Change: Very good thank.
Speaker Change: Thank you for all the answers.
Speaker Change: [laughter].
Speaker Change: And it appears there are no further telephone questions I'd like to turn the conference back to MS Frost for any additional or closing comments.
Profitable incremental growth is the focus goldford the amerisafe team one that we delivered on in 2024 and are well positioned for for 2025. Thank you for joining us today.
Speaker Change: And once again that does conclude today's conference. We thank you all for your participation you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Sure.
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Speaker Change: Okay.
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