Q3 2025 Amerisafe Inc Earnings Call
Speaker #3: Good day . And welcome to the Marist third Quarter 2025 Earnings Call . Today's conference is being recorded . At this time , I'd like to turn the conference over to Catherine .
Speaker #3: Please go ahead .
Speaker #4: Thank you . Operator . And good morning , everyone . Welcome to the AMERISAFE INC 2025 third Quarter Investor Call . If you have not received the earnings release , it is available on our website at AMERISAFE INC .
Speaker #4: 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 #4: During this call , we will be making forward looking statements intended to fall within the safe harbor provided under the securities laws . These statements are based on current expectations and assumptions that are subject to various risks and uncertainties .
Speaker #4: 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 Factors section of our form 10-K , form 10-q and other reports and filings with the Securities and Exchange Commission .
Speaker #4: We do not undertake any duty to update any forward looking statement . I will now turn the call over to Janelle Frost , AMERISAFE INC president and CEO .
Speaker #5: Thank you , Katherine , and good morning . We are pleased that our growth strategy in this competitive market is yielding a healthy 20.5% return on average equity and a 90.6% combined ratio for the quarter .
Speaker #5: Our continued success in the market reflects the strength of the AMERISAFE INC value proposition . At our core , we are a profitable underwriter focused on knowing our risk , pricing them appropriately , and servicing our policyholders and their workers .
Speaker #5: In doing so , we are a better carrier for our agents and create long term value for our shareholders . This is our sixth consecutive quarter of top line growth .
Speaker #5: Voluntary premiums on policies written in the quarter grew 10.6% . Combined with audit premiums , our gross premiums written grew 7.2% and net earned grew 6.2% over the third quarter of 2020 .
Speaker #5: For . We are seeing the compound benefits of disciplined underwriting , robust new business production and strong renewal performance . Turning to losses , our accident year loss ratio was in line with the prior year and quarter at 71% .
Speaker #5: Frequency remains at historically low levels , while severity continues to notch higher on a year over year basis . We are confident that our claims handling practices , coupled with upfront risk selection , remain consistent and disciplined in the current environment .
Speaker #5: Thus , the company experienced 8.9 million of favorable reserve development on prior accident years , primarily accident years 2020 and prior In addition to announcing the quarterly results , we also announced the Board of Directors declared both a regular quarterly dividend of $0.39 per share and a $1 special dividend payable on December 12th , 2025 , to shareholders of record .
Speaker #5: A record as of December 5th , 2025 . The board takes a comprehensive approach when evaluating capital deployment , considering both the regular quarterly dividend share repurchases and any special dividend within the . broader framework of AMERISAFE INC capital position .
Speaker #5: A record as of December 5th , 2025 . The board takes a comprehensive approach when evaluating capital deployment , considering both the regular quarterly dividend share repurchases and any special dividend within the .
Speaker #5: growth opportunities . This balanced strategy ensures that we continue to reward shareholders while maintaining the flexibility to invest in the business and support long term value creation .
Speaker #5: Our capital management philosophy remains consistent . Profitability drives capital and capital is deployed with discipline . We are proud of our track record over the past 13 years , AMERISAFE INC declared .
Speaker #5: Nearly $50 per share in total dividends , including $12.68 in regular dividends and $37.25 in special dividends per share . Along with managing capital , the continued investment we are making in our people and technology is reflected in our solid top line growth at industry leading returns , delivering long term value to our shareholders .
Speaker #5: With that , I'll turn the call over to Andy to discuss the financials .
Speaker #6: Thank you Janelle , and good morning to everyone . For the third quarter of 2025 , AMERISAFE INC reported net income of 13.8 million , or $0.72 per diluted share , and operating net income of 10.6 million , or $0.55 per diluted share .
Speaker #6: During the third quarter of 2024 , net income was 14.3 million , or $0.75 per diluted share , and operating net income was 11.1 million , or $0.58 per diluted share .
Speaker #6: Gross written premiums were 80.3 million in the quarter , compared with 74.9 million in Q3 of 2020 . Four , increasing 7.2% . Audit premiums increased the top line by 2.5 million , compared with 4 million in the prior year quarter .
Speaker #6: Despite the audit premium headwinds . Voluntary premium grew growth of 10.6% , fueled by new business production and strong retention is driving top line growth .
Speaker #6: Our total underwriting and other expenses were 22.1 million in the quarter , compared with 21.3 million in the prior year quarter , which resulted in an expense ratio of 31.1% , compared with 31.7% in the prior year quarter .
Speaker #6: The expense ratio reflects ongoing investment in AMERISAFE INC growth . As we as we see elevated opportunity in our target markets . Our effective tax rate was 21% compared with 29.5% in the prior year quarter .
Speaker #6: Turning to our investment portfolio in the third quarter , net investment income decreased 12.3% to 6.6 million , driven by a decrease in average investable assets following the payment of the special dividend in the fourth quarter of 2020 .
Speaker #6: For a quarter end , we held approximately 817 million in investments , cash and cash equivalents , compared to 899 million at September 30th , 2020 .
Speaker #6: For the reinvestment rate , environment remained fairly strong , with some moderation compared to the second quarter of 2025 . Yields on new investments exceeded portfolio roll off by 77 basis points , driving the portfolio tax equivalent book yield to 3.9% .
Speaker #6: Relatively flat versus the third quarter of 2020 for . The yield on cash held in money market funds ended the quarter at 4% , compared to 4.8% at the end of the prior year quarter .
Speaker #6: The unrealized gain for the equity securities was 4.1 million , compared to 3.9 million in the prior year quarter . Both periods were driven by strength in the US equity market .
Speaker #6: Our investment portfolio remains high quality , carrying a double an average , double a credit rating with a duration of 4.3 years . The composition of the portfolio is 61% of municipal bonds , 21% in corporate bonds , 3% in US treasuries , and agencies , 7% in equity securities , and 8% in cash and other investments .
Speaker #6: Approximately 45% of the portfolio is classified as held to maturity , which maintains a net unrealized loss position of 7.6 million . As a reminder , these securities are carried at amortized cost and therefore unrealized gains and losses are not reflected in our reported book value .
Speaker #6: Our capital position is strong , with a high quality balance sheet , solid loss , reserve position and conservative investment portfolio . During the third quarter , the company repurchased roughly 31,000 shares at an average cost of $43.72 per share , totaling $1.3 million .
Speaker #6: And finally , a couple of other topics . Book value per share increased to $14.47 , up 7.1% year to date . Statutory surplus was $259 million , compared to 235.1 million at year end 2020 .
Speaker #6: Four . Lastly , we will be filing our form 10-q with the SEC later today , October 30th , 2025 . After the close of the market .
Speaker #6: With that , I'd like to turn the call over to the operator for the question and answer portion . Operator .
Speaker #3: Thank you . If you are dialed in via the telephone and would like to ask a question , please signal by pressing star one on your telephone keypad .
Speaker #3: If you are using a speakerphone , please make sure your mute function is turned off to allow your signal to reach our equipment .
Speaker #3: Again, press star one to ask a question, and our first question is going to come from Matt Carletti. Please go ahead.
Speaker #7: Hey , thanks . Good morning .
Speaker #5: Good morning Matt . Good morning .
Speaker #7: I was hoping maybe to start off obviously voluntary premium growth has been kind of solid double digits for a couple of quarters now , which is a great kind of emerging trend .
Speaker #7: Could you talk a little bit about where you're seeing success , kind of where that where that growth is coming from ? If it's kind of any particular areas or , or maybe it's just more broad based and it's pretty evenly across kind of all aspects of your business .
Speaker #5: Thank you for noticing . And and I'm also pleased to say it's more broad based . You know , we have grown policy count , you know , in the quarter over second quarter , we grew policy count roughly 2.7% on a year to year basis .
Speaker #5: It's more like 11% year over year for policy count . So we're growing policy count , which is very important . Our insured payrolls are expanding as well , which is also a positive .
Speaker #5: And particularly in this market , when you read all of the headlines about things that are happening in unemployment and wage growth expectations , our skilled labor jobs in our high hazard industries are faring pretty well .
Speaker #5: So that helps support premiums in terms of payroll growth. We're seeing still very strong retention on our renewal basis for the quarter.
Speaker #5: Our renewal retention for the policies for which we offered renewal was 93.6% , a very healthy number , I think actually , that was the same number we had prior year quarter .
Speaker #5: So good . Even in this crazy competitive market that we're in , we're able to maintain those accounts that we we want to maintain through a lot of collaborative effort from the AMERISAFE INC employee .
Speaker #5: So I can't emphasize that enough . You know , we have a seasoned sales staff , the way we utilize our safety services as part of the risk selection process is truly a value add not only for our underwriters and helping our underwriters understand the risk and price .
Speaker #5: The risk appropriately , but also evaluated for our policyholders and their agents . The fact that that is an AMERISAFE INC contact that they have and that builds relationships with those policyholders and with those agents .
Speaker #5: So it's critical to what we do , and it's unique to AMERISAFE INC . I think that's that's huge on our part . And I can't I certainly can't not mention our claims handling experience , you know , from a renewal retention standpoint , I truly believe the way we handle claims benefits us from a renewals perspective .
Speaker #5: If you've had a claim and it's handled by an employee , we handle it . I think the right way and we treat those injured workers well .
Speaker #5: And that's meaningful to a policyholder . So all of those things together , I think , is really adding to the growth effort in terms of just the amount of collaboration that we're having .
Speaker #5: You know , we've really been focused on ease of doing business , speed to market . And it's just compounding and bearing fruit .
Speaker #5: Now . And those growth numbers . And I'll caveat that by saying all without , we're not adding we haven't added class codes .
Speaker #5: We haven't added , we haven't expanded geographically . It's really market penetration . And better serving , better working with our agents .
Speaker #7: Great . Thank you . And then if I kind of try to tie it one step further , so as I look at your business like , I mean financially kind of earnings returns have been strong for many years now .
Speaker #7: And really unchanged . If you want to look at ROE or something like that . So really strong kind of where the business is .
Speaker #7: You talked a little bit about the special dividend at the outset of the call , and it is a little bit smaller than some of the previous years .
Speaker #7: So would I be correct to kind of interpret that maybe an output of that is an expression of your guys's confidence in the kind of the durability of that growth or that growth going forward and that that's where you'd prefer to allocate capital versus giving it back to those growth opportunities .
Speaker #7: Are there ?
Speaker #5: Well said . Mr. Carletti , that is exactly what you should infer into the dividend . I mean , I'm excited about the dollar dividend by no question , but I think it definitely infers that we believe what we have going here in terms of our growth strategy is not short lived , that , you know , I believe it has longevity .
Speaker #5: And we've said since the very beginning when we started paying out the special dividend , part of the reason that we were returning that capital to shareholders is because we had internally made the decision .
Speaker #5: It wasn't the right time to really pour that into organic growth because we wanted that growth to be profitable . Growth . So now we've had these quarters of , of of top line growth , and it's starting to flow through on the earnings .
Speaker #5: And so that dividend we're using that capital and deploying that capital to , toward that organic growth .
Speaker #7: Fantastic . I'm glad I , you know , put those puzzle pieces together . Okay . Thanks for the call . Appreciate it .
Speaker #5: Thank you . Matt .
Speaker #3: And once again , if you'd like to ask a question , please press Star One on your telephone keypad . And our next question is going to come from Mark Hughes from Truus .
Speaker #8: Janelle . Or I'll say Andy , in the spirit of the of question about the special dividend and the growth opportunities , how do you view your leverage now and how how much flexibility do you have on the balance sheet ?
Speaker #8: This would be underwriting leverage .
Speaker #9: I look at it .
Speaker #6: It is going up , but it's at one . I mean , you know , from our standpoint , I don't think it's really changed .
Speaker #6: It's , you know , it's I think it's increased a little bit , but it's right at one .
Speaker #8: Yeah . And then what would you see as kind of the upper bound , you know , kind of comfortably . Where would you be able to take that ?
Speaker #6: I would say about 1.5 mark .
Speaker #8: Okay . The what's the latest on medical inflation .
Speaker #5: You know , there's been quite a few articles and Bess actually put out a report on workers compensation . And they , you know , spoke to medical inflation .
Speaker #5: Certainly everyone has their eye on it . We're not immune to medical inflation . At the same time , I believe the fee schedules and the fee structure in workers compensation is probably abating .
Speaker #5: That to some degree for workers compensation , much more than it is for non-workers compensation . Things , you know , things people are seeing in their healthcare renewals and those kinds of things .
Speaker #5: So I do think we have some relief from the fee schedules in terms of of medical inflation . Utilization is something . And I think we talked about this on the last call .
Speaker #5: Utilization. Utilization is something NCI sort of pointed to when they talked about the 6% increase they saw in medical inflation, something certainly we're keeping our eyes on, particularly home health.
Speaker #5: I've been talking about for a number of years . And I'll continue to talk about home health . But even in terms of physician visits , what we we've kind of noticed a little bit more PA visits are physician assistants visits , which sometimes lead to additional visits because we have , you know , a doctor has to sign off on a release of a patient .
Speaker #5: So we're just keeping our eye on that . I don't know if there's anything that's more anecdotal than in the data yet , but utilization is something we want to keep our eye on .
Speaker #5: Since the fee schedules seem to be doing their job , and we know that there is a shortage in the healthcare industry . So in terms of some services being available .
Speaker #5: So those are the things we're watching out for .
Speaker #8: Yeah . What's been the latest trend in terms of the approved state lost costs ? The most recent ones . Any trend there .
Speaker #5: Great great question . So we have I think four states that had increases Missouri DC , Nevada , California . And we talked about California on the last call .
Speaker #5: Those are the ones that had that I can that I think had increases on average . What we're seeing in most of the loss cost for 2026 are already in and approved .
Speaker #5: And what we're seeing is pretty steady . State mid-single digit declines . I did look at the CIB study , you know , because they survey agents and ask them what they're seeing in terms of their clients renewals .
Speaker #5: And I noticed and they haven't put their third quarter data out , but in their second quarter data , more than 50% were basically seeing no change .
Speaker #5: So that would say , if that's an accurate , you know , depiction of what agents are seeing or what's actually happening in the marketplace , that would lead you to believe that carriers are being relatively disciplined about , well , okay , the loss cost may be down in terms of the absolute loss costs .
Speaker #5: But what they're in terms of their average pricing is sort of flat , at least based on that agent survey . So that's a sign of I , I would speak to relative discipline in the marketplace .
Speaker #8: Yeah . You'd mentioned your insured payrolls are expanding . Any specific comments on wage growth ? How wage growth is compared to in three ?
Speaker #8: Q to last , last few quarters , right .
Speaker #5: Yeah . So wage growth in the quarter , we saw about 6.7% . The total was about 8.9% , 6.7 was actual wage changes .
Speaker #5: And a new employee count was 2% . So I was happy to see that 2% in new employee count . If you recall , last quarter , it was actually slightly negative .
Speaker #5: And I wondered , okay , is this a blip or is this a data point in terms of is there something happening with integration with our particular employee base ?
Speaker #5: But it sort of bounced back to norms this quarter . So I feel pretty confident about that . That was just a blip last quarter .
Speaker #8: Yeah . What was the wage last quarter ? Wage growth . 5.7 okay .
Speaker #9: So yeah , if I look at the last .
Speaker #5: Four quarters, it was $55,635,767.
Speaker #8: Okay . Very good . How about large losses in the quarter .
Speaker #5: We ended the quarter with 17 large losses over $1 million .
Speaker #8: That's year to date .
Speaker #5: Your date. Yes.
Speaker #8: Yeah that's up a little bit isn't it .
Speaker #5: I think at this point last year we were at 13 if I recall correctly for 2024 . But then we had an uptick in the fourth quarter .
Speaker #5: Again I I'll go to my favorite thing . Unfortunately , these things are lumpy . I never know what quarters they're going to happen in .
Speaker #5: And I'll also say this when you when we file the Q later today , I believe you'll look at claim counts , reported claim counts on a year to date basis or ever so slightly up .
Speaker #5: And but I think it's a pretty remarkable number when you think about how much we've grown policy count . Yet the claim counts really haven't varied very much .
Speaker #5: So I think that speaks to what I was saying earlier about frequency is low . I mean , there's no denying that .
Speaker #8: Yeah . And then anything on the competitive front , brand X talking more about getting into high hazard .
Speaker #5: Great question . It is still extremely competitive . We haven't there hasn't been a lot of mover movement in terms of competitors either increasing or decreasing their appetite .
Speaker #5: I think we see it occasionally in a particular class maybe or in a given state , but it's usually because maybe they've had a bad experience in that particular state or class code .
Speaker #5: That's actually one of the selling points for AMERISAFE INC with our agents is the fact that we are so consistent about our approach .
Speaker #5: You know , we've been doing this since 1986 , and if you look at our footprint in the classes of business that we underwrite , there's a lot of stability there .
Speaker #5: And that's actually , to me , one of the value propositions for agents , for AMERISAFE INC .
Speaker #8: Yeah . Any , any thoughts when we think about audit premium , obviously that's led to some just a little bit of headwind in terms of the written premium but corrected for that .
Speaker #8: Obviously you've been up double digits . If you're seeing a little more wage growth , does that . Is that a positive for audit premium or should that continue to moderate or what ?
Speaker #8: What are the puts and takes there .
Speaker #5: Yeah , that's a really interesting way to look at it . You know I this is just my take on it . I do feel that the wage growth numbers that we're seeing now speak well to future audit premium .
Speaker #5: At the same time , I have to be very cognizant of all the things that are happening in the economy right now with inflation and , you know , everybody's talking about jobs , jobs , jobs in we've seen these headlines of major layoffs .
Speaker #5: You know , I feel I feel our industry groups being the skilled laborers , are somewhat protected from the types of layoffs that we seem to be seeing nationwide .
Speaker #5: A lot of those are , you know , or at least anecdotally , being pointed to things like , oh , we're AI is helping us gain efficiencies , etc.
Speaker #5: , etc. and that's why we're lowering headcount . But I do think companies are looking for efficiencies as well . That being said , with skilled labor jobs , a little bit of a different story there .
Speaker #5: So if we can maintain the wage growth , it should bear well for future audit premium moderating . I would think over time .
Speaker #8: Yeah , yeah . Okay . And then last standard question , how about the construction ? In market the next job being important .
Speaker #8: Any observations there .
Speaker #5: Yeah. Based on the payrolls that are being reported to us and the fact that, you know, I'll point to that new employee count number kind of bouncing back to normal.
Speaker #5: The economies for our insured base are holding up really well as of right now .
Speaker #8: Yeah , yeah . Okay . Well , thank you very much . Appreciate it . Janelle Andy .
Speaker #6: Thank you .
Speaker #3: And once again, if you would like to ask a question, please press star one on your telephone keypad. And our next question is going to come from Bob Barnum from Jamie.
Speaker #10: Hey there . Good morning . I you know , there was a mark . Had you asked the question about the claims ? Claims counts ?
Speaker #10: You know , given the growth and the top line and the graph and the number of policies ? Actually , I had a question on your claims staff .
Speaker #10: I mean , did you have you increased claims staff to be able to handle an influx of more claims , even though I understand that the frequency is down .
Speaker #10: So it really hasn't happened yet . But I'm just kind of curious how you're claims staff is situated in case claims do start to increase .
Speaker #5: No , we have not really increased the number of claims staff , but I'll I'll back backtrack on that a little bit to say , you know , we run a very lean organization , but at the same time , when our claim counts were dipping down , we also did not decrease our claims staff because of the expertise they bring to the table .
Speaker #5: And we want to keep those inventories really low . That's not something that we felt like we should dial down and dial back , then try to dial back up .
Speaker #5: So the number of claims staff has not changed .
Speaker #10: Okay , now I figured they have . I mean , I understand they have a , you know , a lower volume of claims .
Speaker #10: They already handle . So it didn't I didn't I wasn't surprised that they would be able to handle it in-house . But just , just curious , do you guys are you actively looking to expand into any other states and if so , what's what's causing you not to not to ?
Speaker #10: At this point , I'm just just kind of curious if you're even looking at this point .
Speaker #5: Oh , we are constantly looking , you know , we have a committee here that is always looking at class codes and geographies of where where we're not , and maybe where we should be or where we are , and maybe we're not having a great experience .
Speaker #5: Whatever the case may be, I would always say that we are continually considering that nothing is on the near horizon.
Speaker #10: Right. Okay. And the last question I had was on the fee schedules. Obviously, it sounds like that's helping to contain medical costs.
Speaker #10: It just doesn't know . You know , on average , how long do fee schedules stay in place before they're renewed ? And do you see that , you know , fee schedules are renewed that will that have an impact ?
Speaker #9: Yeah .
Speaker #5: Very , very appropriate . They are updated somewhat regularly . And of course a lot of them are based on there's a lot of things based off Medicare and Medicaid .
Speaker #5: So however , how often that gets updated . And plus it also there's also a political side to that . If I if I can say , you know , if workers compensation becomes an issue in any given state legislatively , they will get involved to make some things happen .
Speaker #5: And as of right now , and I'll knock on this wooden desk , say worker's comp doesn't seem to be at the top of anyone's agenda because there's so many other things happening in the PNC , PNC , space , particularly with homeowners and auto that legislators are more apt to try to find solutions for and worker's comp been pretty kind of steady state .
Speaker #5: So I think employers are relatively happy with the , you know , things that are happening . Carriers are pretty much satisfied with the way things are happening .
Speaker #5: So as of right now , it doesn't seem to be on the top , at least to my knowledge . On the top of any legislative agendas in a large way that would cause the fee schedules to change .
Speaker #10: Yeah , it can make sense . Don't don't fix what's not broken at this .
Speaker #9: Point .
Speaker #10: Okay , that's it for me . Thanks for the color .
Speaker #5: Thank you Bob .
Speaker #9: Thanks .
Speaker #3: And there appears to be no further questions in the queue at this time. I'd now like to turn the conference back over to Janelle Frost, CEO, for any additional or closing remarks.
Speaker #5: Thank you . We are pleased with this quarter's results and the successes we're having . And adding small incremental growth while maintaining the standards that make America Safe , a profitable underwriter of high hazard workers compensation .
Speaker #5: Thank you for joining us today .