AMSF - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Amerisafe 2018 Fourth Quarter and Full Year 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 follow at that time. [Operator Instructions] And as a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Counsel. General Shirley, Kathryn Ms. begin. may you Shirley,

Kathryn Shirley

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

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

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

Janelle Frost

Thank you, Kathryn, good morning, everyone.

come the Multiline underwriting renewal. compensation, XXXX will costs to at that decline. continue drawn year the Another fourth soft saw for loss approved rate industry consecutive of workers' were to decreases and in has a close is to XXXX, Most year industry, compensation be cycle. profits. expectation the In carriers overall workers' customers

Amerisafe's returns. for be our tools those combination and financial of while by adjusting as employees increased and highlighting both shareholder for The dividends focus valuable returns our regular efforts such shareholders. our resulted consistent agent special experienced remaining Amerisafe stability pricing led disciplined, factors gradually in and retaining capital strong on these developing to possible Amerisafe, deploying our services relationships, further accounts, competitive to For

equity XX.X% in to loss a slippage from in and a in fourth that incorrect fourth XXXX industries of in bureau, in slightly an to There million quarter operate. see negative midst a of larger XX.X% data increased from of costs. submitted voluntarily the endorse fourth was in came was $X.X competitive adjustment quarter the the disclosed X.X%. business audit to a premium classes of hazardous pricing just of Pennsylvania full at wrote of quarter, made increase the other for I in onetime error December classify of ratio greater fourth now adjustment new in we as We are the were with down environment which for the That's quarter The I'll decided gross in to onetime and important the fourth corrected down quarter. the on fourth the quarters in in policies, Pennsylvania year. perspective, policies overstated for the X.X% written was audit voluntary XX.X% fourth of the also previously which quarter consistent costs premium loss Coupled fourth the by up In account down was million, was in extraordinary retention premiums and a in quarter, primarily full XXXX. to the we in of the reported highly Overall Additive $XXX,XXX premium in Amerisafe, for the with to written premium XXXX. XX%. XX.X% premiums and those competition. reported company strong more adjustments. quarter add In as the X.X% market. overall policies an less about and we premium were XXXX. the The was to the quarter was XXX To pleased overview XXXX that to quarter year. other it's relatively with Due premium audit to this the written our activity, flat the from ELCM reflected compared rating did quick that and year specific is by combined not average XXXX. $X.X total in decline I and down a believe per the that as in In for XXX a return our premium was rates. year, end for our adjustments we which highlighting than retention renewal adjustment remains quarter, premium slightly down soft believe of quarter emphasize be best total, rate, we gross policy

Now losses. onto

year Our Amerisafe's and believe I in loss XX.X% to all fourth risk years, In from and accident ratio selection, even the managing was for accident the current prior evident. loss claims disciplined separating more into safety of adjustment quarter down XX.X%, that ratio expense and approach quarter XXXX. become

XX.X% from trend. exposures, is loss frequency, from multiyear less and X Our the full that we a premium in of year of the current XXXX moderate X that increases quarters unchanged point accident was over and for percentage The XXXX. point severity ratio fact collected remained the up previous reflects increasing year increase and

trends As caused the there were we of year. to beginning that at that the made our throughout the no experienced year, vary assumptions claims we us from

the claims. ratio contributors on we case of prior loss our extended financial favorable The had XXXX, cost-saving is development as for and were management this I close believe million results. intensive of were the Amerisafe's development points in XX.X $XX.X favorable the As or XXXX now claims Neal a years, we to declining in progress to period accident industry, major XXXX. make important Neal? XXXX, able percentage older and In loss an distinction years will costs discuss accident success.

Neal Fuller

Thank you, Janelle.

share of XX%. million fourth which year's year, of deferred year, $XX.X unrealized share. revaluation quarter. $XX.X was was a the our income or from for reform $X.XX of quarter tax quarter lowered net income net of $X.XX $X.XX lower noncash $XXX,XXX per the last assets share income, XXXX, new losses income per which quarter $X.XX per year. the rate a last the $XX.X million Amerisafe $X.XX Operating net an Last net investment This of recall charge diluted with realized per in net share, gains last that you fourth portfolio, corporate due compared at For by fourth and to in diluted will by excludes our created increase of tax impacted reported on and million or or

behind $XX.X of share. Operating XXXX, year $X.XX year produced the best was per income income our second were slightly Net full quarter down per of the for record million or with income XXXX of million in compared For earned fourth the year's million compared operating to or share. net premiums ever, Amerisafe $XX.X XXXX. to the quarter. we last when only is $XX.X fourth to million level operating increased $XX.X full earnings in This XXXX. $X.XX X.X% net the achieved year Revenues quarter X.X%

up earned net $XXX.X year, X.X%, million. premiums some full totaling were the For

comprised compared year full income. investment year for held with $XX.X with X the XXXX. an year. current yield to for in was is U.S. XXXX. These in in an with XX% were or year-end last points to the investment due year-end. X.XX, Turning million basis up value held-to-maturity the quarter at of We higher average municipal portfolio $XX.X bond pretax XX.X% The in $X.X the were The costs. of bonds, X.XX% full no losses the million is cash portfolio gains year-end to fourth on position net XX% Net bonds, no are ago. are treasuries our other quarter the on in XX yield investment the any on the the of in increase The of reflected was realized investments portfolio to and agencies year-end. increase as the gains in income $X.X gain overall fourth yields bonds of which up compared during in carried our Approximately and at securities, $X.X securities significant quality, X.XX% an or X% in there at high AA book from amortized rating with of corporate million the were impairments composed million in tax and and investments. compared saw XX% our portfolio quarter X.XX%, unrealized portfolio these XX% remainder of year duration at The not quarter. of was portfolio on million investment equivalent XXXX, is during was carrying There and

of equities, We small investment X.X% have investment our in a portfolio. about

value income declined now through by $X.XX During the net about stock this per the And value. market, volatile in in in quarter with income million impacted the these $X.X these changes securities fourth running share. by statement,

to operating now Moving expenses.

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

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

operating For to or in commissions the due $X.X expenses XXXX, an increase year X%, XXXX. primarily to increased million full compared

XX.X% was XX.X% year in full with at the for ratio expense Our slightly higher XXXX. compared

and XX.X% XX%. lower full was for tax quarter X.X% XXXX for rate benefit rate equity tax for by Our new due fourth XX.X% federal year, impacted XXXX of lower compared quarter the in was the the Return on than reform. for the XXXX, the to tax fourth fourth of XX.X% was corporate of quarter the which much to of

was compared full XX%. for capital year, management. a And strong full XX.X% was ROE the XX.X% XX.X% year now the compared the quarter year. to was for Operating with last XX.X% ROE very with in ROE Operating XXXX. For

per company regular as as of quarter, During dividend extraordinary share. $X.XX per dividend the the fourth well $X.XX quarterly share paid an of cash its

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

December our Form the with surplus $XXX dividend the was question-and-answer of million for XX-K end be statutory parent session. like $XXX remarks, my market compared SEC will the in up a to $XX concludes paying after we XXXX And the after now insurance XXXX at million subsidiaries the with Our the Operator? and we call That would finally, the close. up filing today open company. at million XX, to

Operator

first from Instructions] Binner comes [Operator question from Riley Our Randy FBR. B.

Ryan Aceto

is any its don't voluntary million to Ryan decreasing. on I actually 'XX. to Randy. Aceto on know touch wanted year-over-year due specific about competition in if or for $X This down I the line business you're seeing business, XQ

Janelle Frost

in we of XXXX, saw we be So the and saw were we in quarter seeing least decrease record the retention it. We renewal our of slippage we is at because in retention. increased in perceived the policy renewal that to simply terms some count, half what competition fourth saw first

keep any results multiline because So picking have in in carriers increased definitely quarter, that reason the poor haven't the don't It's loss to seen competition. mind, which entrants we to about quarters, part is slippage as space. costs in in new comp up we've of talking been was lower premium the premium And same, is are few last other see, the there attribute declined. fourth the lines. there I workers' the We due

rate from, double-digit charge they rates underlying the So getting lower we decreases still to is were so well. allowed are as

classes don't specific in industries our where write hazard want classes G. slippage, But think saw is specific there's And without and about to we our, we the away business F E the I E or slippage the what industries, or more was competitive getting states. to where hazard give workers' any tend we say, And of A So I D should when to comp, information. we've to seen to into Gs. Gs, group,

Ryan Aceto

I then and appreciate one year accident that on more the XXXX. color,

continuing or favorably? Just and wondering XXXX come as, through see if thoughts XXXX you're, could give initial to

Janelle Frost

for if XXXX. we third XX And out Yes. the year looking At the 'XX. year of had, the year end end we have of we the accident XX if at year with for 'XX, accident quarter, recall, calendar said the XXXX, at I 'XX, claims, I'm think large right XX Neal, that end in we you reported was ended number, at that we year had of in and the accident first,

gives the you accident Is terms the increased this in severity 'XX that for But because I saw So end an comparison of us. a outlier? from in that for And this end itself, at 'XX we larger of Enough that comfortable pick an I of loss to think so 'XX recall, claims. the we severity of I feel the the we as now kind more of you thought, year, about a at year 'XX that uptick did concerned is 'XX. than trend? our

Operator

Our comes SunTrust. from from next question Mark Hughes

Mark Hughes

million auto I I been million $X.X So of have premium music. apologize $X.X may audit, is net some would've $X.X that. that background million? for otherwise, for The it premium?

Janelle Frost

Right.

came auto million out $X.X of the cost the loss Pennsylvania premium. So from error the

you're right. So

premium, audit highlight dating audit course, we to the those it a things. fourth We're report standalone audit, to of But been that normally what April just onetime still would back includes that was seeing wanted endorsements, even in was adjustment of X. normalized You number to it have the would get up we to And reporting premium have that on. cancellations, sort obviously, because strong a for gross back rates adjustment, quarter. and to

was impactful us. to it So

Mark Hughes

that light covered that frequency, pick 'XX, the, or 'XX. your the of had in for you uptick loss severity sure in commentary In about making were you any

Maybe in So coming down on are higher still when about a a loss XXXX point Any costs, but down. we bit, loss 'XX, underlying or... think bit. down came early XXXX? costs thoughts It another prices

Janelle Frost

from we costs to loss continue see, We that in see I 'XX. comment. saw your with don't in stopping decline agree happening I 'XX. anything Mark,

don't So rates to into similar the coming what side the any are very those able I see thought of from as were 'XX we we improvement look loss forward, thoughts things to far cost coming as charge. as

Mark Hughes

Or better steady? conservative let's a the going more up approach? say, and that, being Is little is maybe

Janelle Frost

into I the position I at is 'XX 'XX this, similar 'XX. would into my looking say very think the at end of looking, looking of 'XX end

Mark Hughes

part that Very business it insight you initiatives were was any new new think low down. said there that in did? somebody parcel the good. else were a of and additional just business? Or there? The that in you activity, I stepped-up competition? new Or Is Any

Janelle Frost

the just position renewals, there. People books We It's that with around No. not a same same that lot of Amerisafe us, switch appreciate agents and business. were their by. business on renewal in based and price. -- of else's a battle. is the happy there's they talking as new can out moving the typically is, about get really They business may It's we're But price. come hard again, which new business just to someone are to

more proposition with, can is successful, we policyholders getting business. on effort is of agent said remarks, the claims, the that face to my the new that that's quotes price our taken sail importantly, been part that in they're terms there customer handle for important trying a But value really both challenge been there that the with that and the of as selling quote. prepared us just services. we've how we of successful, and where we've and relationships out the a key our way as and with success sure that where agents, Because our safety agree developing put in and So I concerted to and agents to is based make as that's our message where the their Amerisafe able we've of our we

customer those things. renewal Our experienced has

that So customers. new it's selling to

Mark Hughes

Right.

On the reserve.

improvement as in, your the comfortable? the kind driven IBNR development continue that been as may redundant it's I think well has Presumably, that does lot When -- case a of out really you on the terms if of the But to well. case. gain. of clear there in pretty get there's kick you've see that ability IBNR in be to

Janelle Frost

Neal. Yes. Go ahead,

Neal Fuller

Yes. this is Mark, Neal Fuller.

our think you judgment own that make do pattern sort know let looking, your our and of you we'll about I reserves we with reserve.

a year, accident we at older, so can as Amerisafe bit each you more and get little statutory the look and years age, or So statements those they filed our likely the in IBNR to our see.But the and triangles take we're quarter those recently age. years more past. as more comfortable. get so accident down Similar to with NAIC, pattern Each just typically,

Mark Hughes

been I'm in terms and of and you've in gains case year Right, most that right what last the that Is to right? booking thinking that of its largely led development.

Neal Fuller

primarily driven really quarterly think, reserve our development. what that driving I case in we think on development, favorable I reserve reduction XXXX, was the calls case reserve significantly estimate commented, particularly in of for by the was several

Mark Hughes

this ceded to The higher And one more. I'll ratio, premium fractionally Anything that? ask that's quarter.

Neal Fuller

No.

you guide in no significant the full I for at reinsurance changes future. our program. good if look a year, think that's There's

Mark Hughes

Thank you.

Neal Fuller

You're welcome.

Operator

[Operator instructions] Christopher comes next from KBW. Our Campbell from question

now open. Your is line

Christopher Campbell

Hi, Great. good morning.

have So few rate I I guess, rate the you're bureaus, guys as I the I against via a -- on high just book? an levers not getting just the declines? of of level are your some guess kind big just have behind so what state as as And high-level you declines you it's defenses -- rates what these pulling do questions. impact have are that scenes

Janelle Frost

underwriting this and about our experience Yes. go way department risk I'll selection. of we about the say our the

do we're with these out I we think and way we accounts individually going underwriting, surveys do go think it's before more risk think safety, we our consistent underwritten. for know these coupled out in I price price our selection. importantly, history, need And history when And quotes putting knowing accounts. what -- given I our put those and we the at the job we've really quality and our actually a see really on,

know down in So XX%. state "Oh not, are it's costs loss the well, we

in if individually It's account, get going what this account. need course, factor that price into figure to And we underwriting -- is of for this policy." what all me this let report we the It's to So We more our that we compromise our we're We in do of But that how that's that out want to is Amerisafe. with thing. our just want leader. to our to that The making We our work well. right risk all and we're what the sure not to the the as But the at -- aggregate defense day, just not the kept stable selection price. That's all that. just in of the we're and defense out our end public to following competition down is profitability not answer, the want off long-term agents. the customers. have, set dollar ELCM. chasing work the with not has letting criteria of way that is long-term financially the better willing that. they're we proven that history right the fact And

Christopher Campbell

And Great. more just digging little on Okay. your then bit business, pricing, just new a ELCMs.

I those other there things. it Is that? like guess, winning." losing terms whole in you're the of guess you just just All kind business, Or these the tell Amerisafe price? like "not of of guess competitive are I us offer product their new I why features that of that are broadening is offerings guess I milieu to multiline -- they more does? what carriers, development.

Janelle Frost

put really I would believe simply because that a can just the impact most or pricing. probably that they're multiline they with experience in the haven't there that's they what the package, definitely so carriers attractive to they're and draw end the can whole, I comp looking the had policy they think monoline, a -- -- together customer. If can as an that because at is not the workers' and as packing had

multiline price apples-to-apples. me take probably to to and the an it's compare against hard is that But of they for carrier. but yes, give that's little believe part so get more on a pricing, now overall assuming I'm they're lines because want. the because that We're competing I various multiline going it's the to not really So

Operator

I back any Janelle remarks. turn I'm like Frost, this Ms. not for to showing to call further any time. CEO, further questions the over at would now

Janelle Frost

a for distinctions. you. distinction Thank focusing conclude highlighted in to and like I management on Earlier so I'd the as call, Amerisafe, by claims

safety work manage costs expenses; service Amerisafe employers to it's experienced, third, make improvement for stakeholders; intensely First, in employer maximum claims mentioned, to selection small policyholder, and as medical for of midsized whether underwriters secondly, a we're claimant, to are an These or managing embedded to all a achieve injured high-hazard continue our the distinctions our a culture, return live a integral success. risk while to and policyholders, is we a our made we lastly, workers process; are emphasize fellow and will communities fourth, with an ultimately, focus; making part safety of operating frugal and, a previously with we and service the agent, employee have just that we operate. to few in disciplined which

foundation the term downs company members, Phillips, We you of the long On the of board we board continued for wish employees, of Amerisafe finally, of and Amerisafe the his term. who him are retirement at today. of service, end long-serving thank announced has cycle Danny yesterday, served over XX success. in a Danny built instrument the him and June. our over us on the Thank well one board that and and for shareholders his our And behalf our joining withstands years. very the the ups leave will

Operator

in participating have a program, conference. you and wonderful may Ladies today's today's and for day. you does conclude This disconnect. thank Everyone, gentlemen, all

AMERISAFE (AMSF) 3 Mar 192018 Q4 Earnings call transcript