AMSF - Earnings call transcript Q4 2019

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Operator

Good day, everyone, and welcome to AMERISAFE's 2019 Fourth Quarter and Year-End Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference to Kathryn Shirley, Chief Administrative Officer. Please go ahead, ma'am.

Kathryn Shirley

Good morning. XXXX Investor AMERISAFE the to Fourth Call. Quarter Welcome

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

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

will I the to over Frost, President turn and call AMERISAFE's CEO. Janelle now

Gerry Frost

its The of Thank morning, Kathryn, good unique the soft the given everyone. and is market and property you, and industry. challenges, state current casualty

year, the is significant impact past of focus industry. in yes, And on a the there's Over lot declines to been compensation. the continued workers' rate the

exposure growing Carriers a are collecting premium less base. for

compensation, return XXXX, average of tempered. trends AMERISAFE. year our favorable declines. been financial workers' with the favorable XX.X% produced stable compensation equity trends, also has We expanded workers' of another inflation a approach economy, there Payrolls These and to distinctive reported were a However, results with in excellent strong and combined for medical year trends. rate frequency of coupled fourth XX.X% ratio on a of

severity For the years of AMERISAFE, average than offset prior anticipated lower less for loss impact premiums.

Strong payrolls the X.X% count. overall the lessened policy and and in impact XXXX. quarter quarter audit declines were in of fourth written of premiums gross drop down rate premiums the from Our slight a

policies strong retention we which to chose XX.X%. renewal remained Our for for offer at

cover new were policy However, finds renewals count. enough in of lost not terms business to

Our quarter, in compared our in the XXX of XXX to was the quarter ELCM, at pricing fourth as shown for XXXX.

trends the discussing to those opened to call the losses. impact Back I and

First is frequency. about in premium. I frequency choose of to terms talk earned

slight For actual increases than more the to in few for AMERISAFE, claim last anticipated we accident function frequency flattening of decreased counts. a years, premium

XX reported accident X.X% were example, claims the months. for XXXX year down XXXX year from For at our accident

was to believe workplace in premium earned which increase full-employment down year still industries, will the more a X%. an that have for I calendar injuries. in workers While in we lead economy, high-risk unskilled

continued For be these I frequency. on reasons, to pressure anticipate there

it years. quarter's think about more as The to to referring second was severity. relates green. years, distinctly impactful I often Average loss this been severity the we've of recent them to transparent results prior believe accident as is trend how we accident

gained We through our in business of heavily which were expertise timely and case rich provides based established reserves, book our rely patterns. consistent historical on Our on with data us experience specialization.

to develop. ultimately deal year accident types the how of XX with, of injuries indication maturity an XX we better a will of Given gives months

average was $XX.X of In the severities favorable a XXXX. the of quarter, patterns loss an expense case adjustment to million for XXXX impact loss XX.X points. or and recognition to accident loss reserve reduction This -- previously of led lower years than quarter, ratio anticipated financial

throughout their it As greenness. 'XX did remained adjust current was our or ratio for XXXX. unchanged XX.X%, to 'XX, the and accident loss assumptions year, years, for those We not the accident due

ratio XXXX, now and the between for in the of a anticipate barring We some also quarter. the end not change change loss material first year accident do

to Neal to over call the turn now the I'll discuss financials.

Neal Fuller

everyone. and Thank morning, you, Janelle, good

net Operating reported per AMERISAFE income fourth in last XXXX, share quarter. of or quarter an share increase year's was or or compared diluted million $XX year. income $X.XX last per of fourth fourth million $X.XX net the the from with in quarter of per share, the diluted $XX.X $XX.X $X.XX For for $X.XX quarter million

mentioned year earlier. severity were X.X% million prior trends, with compared the produced For which of significant quarter is highest as net development ever. $X.XX reserve was the full $XX.X operating drove level influenced for favorable million year down to Operating Revenues of full fourth by XXXX, net XXXX or income per benign share. share. was This $XX $XX.X And year AMERISAFE of XXXX. in per the our income quarter million the $X.XX year income Janelle or

million premiums Net fourth $XX.X quarter. last year's to compared earned when decreased X.X% to

For the million. These were the trends some loss decline off earned costs full XXXX $XXX.X and year, in by driven workers' XXXX. X%, totaling in were compensation net continued premiums

XXXX. average to was Net year full quarter Turning fourth to investment $X $XX.X the $X.X the net for saw higher million XXXX slight investment $XX.X of a of to quarter income to income. million yields. up million due fourth compared compared investment decrease in X.X% in the We slightly with X.X% million with in

of were the cost. position impairments amortized on of the in of our securities year-end these in year-end. X.XX% and and any year-end at other held-to-maturity our carrying treasuries are was as of XX% which X% bonds; The portfolio X.XX%. full significant year losses the equities quality, carried book gains are portfolio unchanged in portfolio current investments. The additionally, XXXX. were remainder there The with of high investment the in gains realized comprised on $XX.X duration portfolio held or XXXX. XX% an not These portfolio an almost bond is cash portfolio investment XX% tax-equivalent year-end municipal U.S. corporate no unrealized overall in bonds, quarter gain from average million was the pretax AA in which and or the of municipal bonds yield value at at in the at and the in XX% securities, is yield rating X.XX. agencies; full during reflected our X.XX% of the taxable year-end includes bonds; There And quarter were on Approximately during or at no comprised for And year. is

to Moving expenses. now operating

and operating Our decrease $XX category, salaries of in $XXX,XXX other the commissions total underwriting was quarter a end The with fourth injury expenses in underwriting $XX.X quarter $X.X of benefit of compared costs. of of an benefits, XXXX. in result million of expenses the included million a as By fund assessment. primarily other and million were multiple and quarter million million XXXX $X.X the due expenses fourth and $X.X the to

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

year or expenses insurance influenced mentioned heavily a million operating $X.X full fourth XXXX, assessments, by the decreased the benefit earlier. For including quarter X.X%, in reduction

ratio full year XX.X% with for low XX.X% expense a As compared result, was XXXX. in at the unusually our

a full Our for than as tax fourth rate both in and XX.X% for XXXX the year, of underwriting the higher profitability. XX.X% quarter stronger result was

Return XXXX. fourth XX.X% on quarter to quarter for XX.X% fourth average for equity the of was the of XXXX compared

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

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

payable Board as an XXXX. shareholders XX, of the of of a quarter, dividend. on quarterly represents XXXX March declared X% This record dividend per in quarterly This the XX, March share, Directors to $X.XX regular cash increase of

And share finally, paid $XX.XX year. with And dividends throughout out couple year's a XX, per $XX.XX, last noteworthy up shareholders we the other Book compared items. share. XXXX, per just of value per at was in $X.XX share December slightly to

was next surplus $XXX we week. the XX, XXXX filing at with of the $XXX be Form XX-K our compared And end finally, SEC statutory at Our million December million with XXXX. will

my we the open Operator? the would to concludes for And That remarks. up call question-and-answer like session. now

Operator

with go [Operator Instructions]. Binner Randy FBR. first We'll Riley B. to

Randolph Binner

of kind So that understand I think to into run expenses better the would how we'd dig future. into like the rate to

starting second fund. just with So the injury

I $X.X was quarter? in that ratable at out that the coming of throughout was think the that that was -- was million. something fourth year? Is kind that Or quantified

Neal Fuller

a being of actuarial the down has that indicated assessments. It no there the and shut quarter. up be an would in in analysis its fund. that did is down, fourth trust fund injury multiple shut further accrual No. But That XXXX or the had we was was trust that for reversal

that So we had during $X.X the assessments. took future down quarter. million we up And for those

Randolph Binner

that's So it sorry, was then that And -- for? which I'm a What it? one-timer. fund state was

Neal Fuller

was It for South Carolina.

Randolph Binner

that shut is longer -- that effectively. And Is no it's right? down fund

Neal Fuller

assessments. is correct. [indiscernible] future They That

took we accrual why that's the down. full So

Randolph Binner

Okay.

I -- been but through accrued been been had expenses? for, guess, over that that had -- that So time hadn't

Neal Fuller

Correct.

Randolph Binner

lower like you run add Okay. little other more Or general -- that it Was be still the else question that -- a if fund anything lower? that there is would just second of little so ex there back, Then reversal? expense. there we comparison seems on normal maybe a affecting is rate. just that's quarter-over-quarter, But something injury the was the the were year-over-year compensation then

Neal Fuller

I have those accrue typically those. general, other Typically, years, we've lower trends assessments. see. because that's see ratio think year fourth bit charged expense in and That's assessments those generally, been for quarter, then assessments past the the guaranteed trends why expenses -- a throughout the we favorable of because of favorable not would No. we And we And quarter two bit types I impacted by favorable the lower. the are our assessments other say, you'll little fourth trends have in that as market, assessments a expected. in comp reverse fourth the in workers' lower the some those trends little loss-based in assessments is quarter being severity trends if than seen will and our states, the fund

Randolph Binner

loss just XX inflation. think 'XX for And season XX on the Okay. had months, years. XX book. -- the to result one workers' And like benign it 'XX then to the accident usually was takes medical comp about I reserve months I to Obviously,

inflation business? a as give other now, me loss like and just trends though, the XXXX, and observe view, trending XXXX how are severity medical you in So on

Gerry Frost

Yes.

XX.X% XXXX, expected for we 'XX. medical when established we think the mid-single-digit I that assumption, for in inflation had

Randolph Binner

[indiscernible] And similar to XQ 'XX would income net or? Okay. that be

Gerry Frost

Yes.

that in So similar and 'XX. 'XX be accrued we would had what to

Operator

Carletti Our next question JMP. will come from Matt with

Matthew Carletti

little prior bulk more you mentioned 'XX be years just grouping or X to A could we specific that year it? I X it across of you with the know even any was of years? years? development. Can a from. Or years were start 'XX Was the questions. came it fairly those that there drove few period across hopefully the One,

Gerry Frost

Yes. I'll quarter. by year give you accident the for numbers the

$X.X million. 'XX 'XX the And million. million. million. So balance $X.X remainder was the to was $X.X then year 'XX. was of accident $X.X 'XX prior was 'XX was

Matthew Carletti

you. Got

thinking view I then about shifting Am kind offset your expected -- your of been maybe that as earned Great. for year absent to premium to holds? the taking of about just of accident right, And helpful. predevelopment that to that view macro methodology is frequency flat on different your really that some the on view comment Okay, prior a severity of that's by expecting a prior frequency XXXX, surprise. the place? informed And still increase

Gerry Frost

Yes.

I we're uptick going to I good remarks, as think said the a as working are prepared look way just still industries. we at -- see my hazardous an mean, claims it. that to in in I unskilled that's workers in I believe

be accident we should that as we front, changed. anticipated, seen increases slight But we frequency 'XX flatten 'XX. have the call with 'XX. severities in least yet. we looking -- to 'XX. hasn't drive than severity like But in into I mentioned, and I We're That again, XXXX, I expect on yes, as the at frequency. through just 'XX I So or be 'XX seen, have relatively willing years see less and -- say, But to to think 'XX to flat that not it,

us long You've a Matt. followed for time,

when or pretty we hearken accident about trends things the data, negative year think we're quicker we're in I things XXXX. recognizing back to negative -- see

loss During we we the our that uptick an as year, at saw raised point. accident pick frequency in

long to more tail data. line recognizing little cautious It's positive -- of little our a business. is trends a bit in a lumpy. about This think more I slower or we're

too So not positive ready don't -- on quick of side to when we be comes to that. draw it try the the

Matthew Carletti

to kind case the can, keep down or that growth? right absent, thinking market, assuming I the it methodology to in Yes. of of turn future, because that kind seems served foreseeable management, if there's returned of norm -- the more to just still I of be then your on on Is pressures in you and the kind one, the Am we're capital in still that's would environment probably in Definitely dividend? a stable earnings there expecting capital well over that Last a flat some the still in like form revenue be years. absent and strategy. improving say, just plus ratios

Neal Fuller

typically I we Yes. this up of in dividends. $X.XX. Matt, on we don't $X.XX earnings future out out, comment this is pay Neal. ended We would year. did having dividends point And operating

sort the and have of make capital it dividends. outearned we board the years, included So pace. addresses special and position and at periodically in recent company's quarter, which each management the dividend But looks adjustments,

Operator

[Operator to next SunTrust. Instructions]. go Hughes We'll Mark with

Mark Hughes

The number of 'XX? you Do losses for have the and with number XXXX. large that comparison

Gerry Frost

We accident we claims end compares call over of year would Sure. to year year and claims, for XX the ended $X at case the 'XX, XX what incurred. 'XX. severe the XX, accident with calendar for of year million That

Mark Hughes

the you've that performance I How evaluate do is much IBNR? the that? and about your And been reserves. has think in case when on we IBNR? you here do how sitting better then think savings And emphasized there

Gerry Frost

Yes.

So begin in the obviously, current our -- tried anticipated ratio. data, when accident change year. that year, not the really there's have been an pattern accident doesn't unless historical has an We we something to compelling during loss -- we

something window. Although, our 'XX, that or We that at But back the IBNR just a as get large it. we change losses completely harking move to of XX-month that balances point, handful and typically to try data mentioned did really we adjust earlier, the we don't really compelling until to needle. XX- in I list

we've -- favorable been development throughout 'XX, we with 'XX, 'XX. in the this case Hence, quarter year the that the years, changes experiencing accident you that saw

lower as You were I remarks, anticipated we hence anticipated, -- in in saw the than or adjustment severities mentioned made some the than the actual -- in were adjustment. my we lower severities the coming

Mark Hughes

Right. To case reserves?

Gerry Frost

And IBNR.

Mark Hughes

And IBNR.

this what loss XXXX. you be roughly loss your on an Okay. cost look would the expectation of multiplier footprint, And cost? When cost The loss kind at for official is trends?

Gerry Frost

Yes. Yes, understood.

and So charged XX-K. what, per our for The for we clients premium ELCM around our we in our lot, projected is -- if rate XXXX. about we something cost rate which enough, that I the changes the in number is which in -- think a the NCCI X.X%, decrease around talk about loss XXX, was 'XX oddly disclosed that

So as -- rate single digit, would thus were, with published just be we of yet. line is expectation far. But I don't Their for XXXX, the it I seen filings they've expect "In on that I that." higher to believe we've think based

Mark Hughes

When about guess, your costs, steady, Right. on but think would would pressure down. slowly come outlook have I competition still you've pick to hand, down declining numbers got loss your you've about suggest got the hold to I and All the on to the come think that loss kind more ELCM market, one like continued in current severity, frequency that years, right the accident year. expected way it? pressure, would since But and been of has sounds I people the upward assume benign than Is restrain to that your it last steady. therefore, it couple hold of

Gerry Frost

it, of that's very think summarizing way I yes. accurate a

Mark Hughes

say, so on and far, good least 'XX to at 'XX? is which so Right,

Gerry Frost

I Yes. -- willing how green Yes, Really, still they're right. so, but all good, should this we're for very is us, it. said that's not you're yes, and to have

So far, so good.

Mark Hughes

the made Yes. on then payroll? you've your the earlier trends And up Any audit? remarks, I whether premium but that wages Yes. know bit. about don't comments in audit comment general any a was in

Gerry Frost

a economy, We the certainly are Right. from our industries. like strong industry, benefiting in particularly,

We premiums our positive from continue see to audit insurers.

the helps rate It strong, think bodes certainly remains for offset the that that signs declines. the So I well economy us.

Mark Hughes

Neal, And outlook tax the -- rate XXXX? then the for

Neal Fuller

really because how taxed the that's change gain tax-exempt municipal is investment that fact then any at through income And much our tax be much how rate. have underwriting shouldn't by There we XX%. driven of our portfolio. It's in Yes.

So expenses was it stronger because Obviously, well. was mainly had that higher we this as that year, profitability. but affect underwriting

Mark Hughes

down has Yes. last kind think been that, ELCM, X% The prior ELCM to just X.X the state for competition, years. quarters. coming year-over-year, to trend each the when the about four the we X% here, X% was X% to of And of of it at Janelle, looking

single to drift low digits. continuing down So just

to of the do feel had you up the competition? will how If like shape given nature current that guess, you

Gerry Frost

out when there. now always calls, -- high also think somewhat of try the still time differently competitive There are not still -- wanting It's again, A in people see that guess, do to prepare and is -- I feel willing all groups, some I that The answer We new where our Yes. than terms to in I willing think for It's -- of competition very see workers' a spoke? F -- just business. out I but do in marketplace. lot these only protection I write competitive about results actually are comp. we workers' and we did we're last the hazard the we in still G binding the see write retention, E, to fact comp positive are G, to I hazard no.

which But positive let we policy I've in clear, me been least I soft grow key to 'XX, even count is for throughout a said that's So this us. be us. that, since something market. in we that's -- to a or that since very the policy flat sign 'XX, think do disappointment count opening at I've comment, not XXXX, did maybe my and saying wanted We

Mark Hughes

G. results say To point, -- that again, you're that that F E, in again. Yes. and the that seeing Is positive

Gerry Frost

same on high. our think is those that classes. talked business those Yes. I retention able we is I about in our And classes. in those is are classes what to result this new call, the coming I The retention mean by And positive in bind last

premium us, lot workers' some carriers hazard high focus that. and clear? maybe a to more are comp those our Is there us good But out wanting protection from we're gives that's write a looking So -- for least that dollars. at there sign for

Mark Hughes

same? Okay. It same? different? the And is you Does that's it would Or about the feel does. say that

Gerry Frost

No.

the retention that's got But that's in in how "Oh, E there the -- has way I intensive, would a been market. been losing whether is wanted that the gauge started sudden would I to of Then policies all throughout think shift I a soft competition that more competition." guess, really I retain. the I that's -- -- I I say,

Mark Hughes

have going and I the apologize if you for cumulative been there it development of 'XX -- the front don't on what But on. has 'XX? in know you, I -- Neal, the

Neal Fuller

those I development of the the favorable then full this I for 'XX this I of $X.X 'XX calendar a don't out 'XX, accident total, 'XX $XX.X million was -- and 'XX amount year, $XX.X development years was recognized. have million. terms on was $XX In actually, this in cumulative Accident million. of that prior we've -- over a million. for it time. have million. have full $X instance, million. was year year. $X.X was And was 'XX year

Mark Hughes

year me, it took refresh out first the was Then gains 'XX? you of

Neal Fuller

Correct.

Operator

no have for Frost it other turn Janelle to questions this to We closing back time. like at I'd remarks.

Gerry Frost

February in and this trends delivered. AMERISAFE, all joining risk Surely, you. careers And aptly challenges talk on career for offers. At a XXXX, in our our about based us opportunity. employees you exciting is Thank Thank insurance month. are into insurance careers today. turning highlights opportunities, the

Operator

conference. all for today's Thank conclude you your participation. does That

You now may disconnect.

AMERISAFE (AMSF) 20 Feb 202019 Q4 Earnings call transcript