AMSF - Earnings call transcript Q4 2017

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Operator

Good day ladies and gentlemen, and welcome to the AMERISAFE's 2017 Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, today's program is being recorded. to host like Mr. today's I'd now introduce for your program, And Gagliano, Risk Vincent Officer. Chief sir. ahead, go Please

Vincent Gagliano

Good morning. the investor Welcome to call. year quarter end and AMERISAFE XXXX fourth

on earnings If are is call in the Details A call release. it received on have today's recorded. site the the of be you is www.amerisafe.com. earnings not being available replay will our replay This how web at access release, available. to

expectations statements the the and of call, assumptions we will today's the other in making are XX-K, if Factors from and materially will factors, call in release, now discussed reports subject or based Frost, any statements, various that statement. factors and We prove These risks, earnings call to AMERISAFE's and duty results in underlying or expressed other turn made implied including update and to Actual current this are to During Janelle and results Form during CEO. uncertainties. forward-looking this on the any be our and be President I over assumptions to results and comments the with uncertainties these statements. incorrect differ the risks may forward-looking do not section Securities Form XX-Qs Exchange undertake of the Commission. Risk in filings as

Janelle Frost

Thank everyone. you, morning Vincent, good and

to challenge Early maintain of declining profitability, AMERISAFE to an marketplace. to underwriting results metrics. discussed loss me value for to our to competitive before soft to in our policyholders. services the for emphasize For quickly provide the some cycle, have Allow moving sustained point, now, some time returns quarterly and in increasingly we disciplined we on highlight deliver strategy financial costs outlined the my adding superior shareholders, the year, our

XX.X% reform. at on out impact taking the XXXX operating XX.X% of ROE for tax an basis, was and Our

as strong with these was paid our ratio balance Our out XX.X%, believe along dividends to I in strategy. our our stability in our combined results, and sheet, and our shareholders. our commitment to outlined policyholders, we reflect and $X.XX shareholders

the on adjustments, the the was to of quarterly in added million written audit related written gross in of premium XXXX. $X.X fourth $X.X were quarter to slightly premiums fourth premiums Now million quarter, compared up metrics, quarter The and increase which spurred XXXX. from gross by quarter to the in

quarter than While of a $X.XX ELCM policy down from the less $X.X we for was fourth slightly ELCM debt $X.XX. quarter, was premium XXXX. grew X.X% million down only at of an The count voluntary the in average

XX.X% those It's discipline. environment, premium ratio. to of the retention strong also responsiveness reflected risk we retention quarter, that which rate as our level our earned in discipline, our the same in the had rate fourth which appropriate reflects ultimately for while the we maintaining offered competitive policy I We underwrite, policies for renewal. for believe our loss

loss for net LAE and ratio for year. was XX.X% and quarter Our the full the XX.X%

for to accident as loss Our estimate of premium Both compared up trends severity a XXXX. year accident current and function ratio year XX.X%. the for in quarter, XX% from frequency, were changed XXXX to the

when reported claims we the Throughout the prior were quarter. down initial estimate to back assume year. we the increases, first XXXX, you recall, If for such year, set compared in our

X.X%. year, were was full while the net premium X.X%, down For our earned claims reported down

in the quarter's current call, accident some year. concerns we last During noted severity about

estimate this change a saw estimate caused points and quarter progressed, which we further our year in percentage quarterly XXXX. The to X.X trends, impact fourth severity to increase ratio. of change the the added the accident As for us loss

XXXX, in quarter, primarily favorable of XXXX experienced case from development prior years accident for in XXXX. absent years, XXXX, we As development $X.X and the million

maximum who to we believe loss repeating deficiencies us maintain shareholders to returns be industry. I medical when continue discipline, end line call claims closing will fact and as the for claims over for very of and increase, to financial X.X% avoid underwrites, from the for a This inventory manage XXXX, cycle greater building turn begin improvement, the of and was results. continues loss way to work, has a claim. trends stability now to compensation for competition. at as Workers cost History and return profitable turns, the provide to itself, down open I XXXX and the our the will Our ultimately to drives policyholders. Neal discuss

Neal Fuller

Janelle, morning everyone. good Thank you, and

compared per significantly on benefit basis, $X.XX lowered fourth assets, quarter. go income, tax share, the $XX.X corporate rate $X.XX portfolio, $XX.X or income which For forward share or of net $X.XX XX%. diluted Overall, decrease impact, $X.XX quarter, lower share. by new of the excludes impacted realized tax million tax last a as of our the non-cash and on Obviously, deferred million investment This from of Operating gains in fourth per rate the charge income share for net lower net with $XXX,XXX as $XX.X of with new which quarter of fourth our well income AMERISAFE tax a XXXX. losses in the will quarter per was diluted XXXX, at per quarter or the net AMERISAFE by million net revaluation reported corporate reform, year's in fourth was due XX%. of created the a a to $X.XX

record was This to earnings net with premiums Operating per a but we in For of the record operating compared $XX.X XXXX. full to full quarter operating year's $XX.X is income or year XX% the or XXXX. year quarter level when Revenues XXXX million net XXXX, income decrease our fourth the to million fourth for earned the $XX.X of when XXXX. of X.X% declined X.X% compared to decrease compared a $XX.X in last $X.XX the decreased quarter. of year, share, in from best Net third million the AMERISAFE was reported net $X.XX income per income share. produced million

$XXX.X earned in For X.X%, net million. the premiums full year, were at coming down

Approximately saw of was of end are our decrease are fourth investment comprised of in unrealized U.S. held $X.X book treasuries portfolio the gains investment These and quarter. largely these bonds, held and value, quarter decrease the and agencies last up X.X% Net a the with securities, due X.X% hedge of to to we of to investment to The year Turning in quarter. high to income, was XX% investment municipal year increasing fund million and for for million income significant XXXX. value the compared There the with the there were the during we in losses on securities no is $X.X quarter an other the fourth the fourth portfolio or from which was in maturity the XX% year end. the on end income. no in remainder million our position XX% carrying in yield not of million amortized investment year's quality, year compared year gain full bonds the $XX.X reflected and bonds, on million average was in portfolio is costs. full at in any XX% of of during overall in rating, reflects new in at net impairments have end. corporate the were or yield The XXXX. X.XX%, carried $X.X gains at yield of at up portfolio X.XX $XX.X X.X% pretax were taxable with bond as X.XX% ago. year XX% investments. year AA duration of investment The realized tax in The portfolio on cash one tax equivalent slightly This rate quarter current XXXX, our an

million and due other in quarter of Moving million now the same to expenses higher $XX.X and insurance underwriting fourth benefits, to million costs. of the XXXX million the compared commissions expenses primarily quarter million was of quarter total in category, salaries XXXX. year. assessments, increase By underwriting of were $X.X our compared last other included to and $X.X operating and with quarter $X The based expenses; $XX.X fourth the

XX.X% of for for quarter XX.X% XXXX. fourth expense compared the Our quarter ratio was with the

expense lower Even for was operating For decreased million premium ratio the XX.X% XXXX, XXXX. the X.X%. in to earned higher with slightly year XX.X% year expenses full due or lower expenses, operating compared with our in XXXX, $X.X at

all significant the net of deferred $XX.X the fourth tax and Reform for our on was assets. as impact rate Bill XXXX, million a during Tax the result tax quarter, and Our of

the XX.X% a relative income, from Excluding down larger a impact, year a quarter, our the exempt with tax to The decreased XX.X% in income, ago. reflects of compared year ago. tax decrease rate to amount taxable

compared the tax effective XXXX, the XX.X% was XX.X% rate full For in with XXXX. tax excluding reform, year

X.X% on again substantial to fourth now we was be rate, reform. equity quarter we the instead profits quarter As of expect of for XXXX the quarter compared our tax XXXX, for was XX%. Operating to at XX% impacted taxed new benefit for by XXXX, fourth XX.X%. to Return of will underwriting tax XX.X% look see as for the lower the ROE

full its year, dividend was compared during the $X.XX of quarterly the dividend as XX.X% full ROE quarter, year, an share. last with compared in while For ROE for per capital extraordinary regular XXXX. as with management; company XX.X% XX.X% now was of the well fourth year operating to share, And the XX.X% paid $X.XX cash per

quarterly XX% This the as represents XX, the XXXX. items, per finally, quarter, book payable value per $X.XX paid $XX.XX, at dividends XXXX dividend. share, the of to down $XX.XX record with we per share just December and noteworthy share, X, a of has dividend March shareholders was shareholders a in during per March cash declared of board the share couple quarterly other And in slightly $X.XX on XXXX a year's regular last of XX, This compared to year. out increase

with now filing December XX-K time. to statutory the And for February Operator? Form at this That SEC surplus we question-and-answer XX, session. year million we'd like finally, open tomorrow, was it the will XX $XXX million after $XXX close. market up be at concludes remarks, compared and last my with XXXX, our Our

Operator

Instructions]. [Operator

Riley. question line of B. comes Randy first from Binner from the Our

Your question please?

Randy Binner

a large morning. is in book? good an I business you kind have understand throughout question a past, more claims of a the what it's few large seeing the wanted Hey, that's something systematic what of have kind about the wanted claims, of are because specifically can or ask have book seen I if we to where Thanks. function we a severity, impact. to like of if

Janelle Frost

by start whole. questions, a think talking me let about you so [indiscernible] as ran book the I

If you not in next change XX-K day, industry is filed alluded you of really mix at the see our look that to, mix, will Neal the in be there our the a when business.

So steady from not large what it's state you between shift the a have is seen. pretty industries, there

has consistent that a approach. So very been

million, when I $X the XX with claims. regards XXXX. There point XXXX, past or million, the about million. reserving has XXXX In same real question from years in million is, you largest in year philosophy, philosophy -- not our from in maybe claims of we think Secondly, over time, XXXX, In talk coming at about out recession. we at $XX XXXX, to to case increase if and reserving claims a new what world $X we is to things incurreds changed here I back how XX those did the claims in return was the work losses, end there meant AMERISAFE and it to the have ended which $X of great range accident had XXXX reserved ranges no we our $X large million. accident reserving the this philosophy, because claim think, do about over for XXXX look upper we XX million talked $X that claims. change your to But of in we from living

want I XX third was terms tell had there what I make say those increase your are large we obviously just looking systematic severity. this just in is to only is One the call, in don't anything seeing can to but an quarter [ph]. volume through we terms I claims. there see trend, there the of something or in does that, in don't -- year not the to severity, in not? my So But of alluded book, of concerns that It point, in dollar a so you we

Randy Binner

Right.

what that I the -- an piece I but inflation it, we is I a there mean, And to little bit it just mean, me seeing rest higher got the claim mean, payouts? is really of driving is it are what more guess is situation say, four I driving doesn't plan So wherein has it -- like, inflation there that right? we these are So severity? loss, book? it, sounds is three you that because indemnity healthcare be, claims? should it's the piece, there of the it is and litigated the can on is a claims or to Is not change, it the

Janelle Frost

the the it's think accident. I severity of

indemnity They first of be for to thought frequency coming year, quarter, just to little more was a So obviously mind, when falls, about came major motor But we When have, keep I that the had XXXX the XXXX. because large at just does. you the initial I of typical premium, seem those and we -- this, going into that more that the piece drives in to are in we look accidents, universe are the the that though, major of medical bit severe. injuries be assumed at we said piece talked than those are in terms we right, claims, our vehicle the estimate -- even if look accidents we and it's this injuries fruition. in

to actual of it's severity it accident grew XXXX. our Our that are just is business? down, mix the claims point, the Our those claim claim down are is year policy for so is counts your where concern and of counts count,

Randy Binner

see I don't is was ask that NCCI something you -- That mean, one am I data, in know. going like interesting. I the to more,

the auto instance are vehicles industry, look accidents, if faster, of because at moving So we for auto severe have more -- rest seen the accidents, we

Janelle Frost

Right.

Randy Binner

one is this So example.

So validate NCI small can what in data, case? not is seeing or that your the are book you against you relatively

Janelle Frost

high we hazard the No, niche, are I in for writing we speak a and keep are as can't whole, insured. a writing industry mind, because

tend So have accidents. more to severe they

So will prove that. don't out have data? that's the industry-wide I answer good a that the question, to in

Randy Binner

will leave right. I you. All it Thank there.

Janelle Frost

you. Thank

Operator

you. [Operator Thank Instructions].

the comes SunTrust. Our next question from Mark line from of Hughes

please. question Your

Mark Hughes

morning. Good you. thank Yeah,

Janelle Frost

Good morning, Mark.

Mark Hughes

settlements more the feel that getting are do like the say severe, higher? hurt that the medically you payout, it's are are you or When more, speaking, -- accidents people

Janelle Frost

So hurt you said the medically, Again the been have more? getting down. they Rephrase question? are claims

Mark Hughes

of damage Just the actual the is costs the the [indiscernible] -- versus in the fact physical damage?

Janelle Frost

your new a I good lot a that year know we I those or saw are about not. the mean think, figure to severe question. a We of is that if that to of data? out that vehicle Is nationwide in what terms driving of That's something in sorts single and you accident we trying distracted least did there, more don't wanting lot see, data we there things. see answers at out question which of know, do XXXX, accidents, are does accidents.

Mark Hughes

So costs -- than I think, more to it was my rather damage more per accident?

Janelle Frost

named get case, get a in Yeah. injuries, vehicle motor And I were of of a terms But vehicle a in the large I off severe think if our just quad, of I you don't lot accident, where example, that yes. more am for speaking we did. XXXX, They losses would motor this a in wouldn't lot -- accident, we you quads. think a

Mark Hughes

do there at can a are about that steady, to in assuming there wages your when an parallel I actual guess your start times damages Is accidents. steady, you strategies that, relatively medical is is [ph] is underwriting experience, see book or actual the that? the -- uptick historically? like higher severity understand I your of inflation -- In like to

Janelle Frost

At this over-under, am point, there word to Harking a say can't trend. back, is it's use lumpy. I going no the if I

of what but as sort to adds to luck the injury. the matter know but I that to high that's lumpiness just of, fall, lumpy what how business, fell severity We a of do. in landed, the they the particular these going a they And to how of we insurers, it's hate hazard are they We fell. and of say, in draw, with are they how is

Mark Hughes

the should about pointing loss about XXXX, Randy to we think the higher then we assume when pick, than And XX.X%? Right.

Janelle Frost

seems to don't guidance. the too I see what on say that a to of macro forward-looking want give much be the experiencing anything will I don't moving in terms needle I in this, are industry. basis,

XXXX. costs So we loss underlying in had declining

that the to the will terms probably was are we think don't in that plenty we capacity not enough into think the in were probably XXXX, move needle in of XXXX. XXXX, There the marketplace. in that excess saw but -- of I I still degree continue to cats

believe XXXX be competitive. I as will So

affect I and translate pricing long ratio, the So see there, into we that anything dramatically loss affect way am will I you loss the don't getting know the XXXX. trend if a how how will in I pricing ratio, changing saw

Mark Hughes

if on little the I would so, [ph] tend upward loss the Just competition, that reading Is properly, am that a -- you declining loss tank pressure trend the costs, would towards -- increased

Janelle Frost

this this I earning I at function And appears, for really right? it premium collecting, to a for It's the less -- point, going of XXXX. am earn am policy premium,

Mark Hughes

you. pretty about intentionality stepdown bit of marketplace, look at to Got steady I there more was how that, that? we some between a year-over-year, sequentially do QX was you. When QX, it the Thank competitive ELCM, think and little

Janelle Frost

little ELCM The a marketplace at hard quarters, charge fourth it's because book are did renewal terms we you It's bit consecutive is to of at certainly last book, competitive. look that on in what looking business really if quarter. of ELCM's

was a in for the the policies X.XX, the we we simply because, I were I opening X.XX a very comparing do XX.X%, as market, think is my to for remarks, renewal, high But very which chose slight responsive rate was those really retention our percentage. I So said decrease. is which to

Mark Hughes

puts anything recur influence for we when about the as think And think expenses, will obvious that that the takes, or XXXX kind XXXX, will I about of not about any expense or likely ratio that?

Neal Fuller

Fuller. No to expect to would environment. to declining see Mark, as we is try manage expect ratio expense to the continue we Neal this premium No, a

would ratio change. expense the So our not for guidance

the we has think, XX guidance. think XX our been historical at range, I in we to look would

Mark Hughes

any effective exempt likely mix on tax And given investments, rates? of investments, tax, your the tax guidance then

Neal Fuller

guidance because, to imply level we some for give obviously, favorable favorable No. development, don't of us likely It's tax on it hard forecast and rate, development. would

will us, XX% the So the be XX%, other it's munis be profits and income changed. then taxed underwriting rate would tax at -- the taxable -- for has of on difficult on the change taxed to now than amount the not

Mark Hughes

Right.

So something XX% to than less place good would start? be

Neal Fuller

expect would we that be lower that. Yeah, than would it

Mark Hughes

Maybe high teens?

Neal Fuller

you do up But tax with you I will math, there. go the rate. the won't if come

Mark Hughes

Yeah.

Thank right. you very All much. Okay.

Operator

further like does for This you. program. to session Thank of today's remarks. I'd the the program any Janelle hand conclude back question-and-answer Frost to

Janelle Frost

AMERISAFE and you in call your Thank interest joining for for today. the

pleased to company execute believe for long with you. our positioned on results strategy. the is are XXXX, our well and We term Thank

Operator

ladies in participation you, for program. Thank the gentlemen your and conclude conference. today's does This

may You day. Good now disconnect.

AMERISAFE (AMSF) 27 Feb 182017 Q4 Earnings call transcript