AMSF - Earnings call transcript Q3 2020

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Operator

Good day, everyone, and welcome to the AMERISAFE 2020 Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kathryn Shirley, Chief Administrator Officer. Please go ahead.

Kathryn Shirley

Good morning. XXXX Investor AMERISAFE the to Third 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. website

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

Janelle Frost

and Kathryn, everyone. you, Thank morning, good

to a to is into be nine impact determined. now are global rates pandemic. months yet The compensation We workers' long-term

the financial loss ultimate believe revenue a any differences regarding toward costs, pressure industries which were some hospitality not Therefore, enough mix plenty costs. workers' also influencing product. the to are AMERISAFE more given loss what competition. weighted is heavily decrease While the near-term given business industry's in and declining a trends An is competition to related orders varies from identified will X% outlook. loss state business markets, were ranged between which altered opinions temporarily in for by not there to long-term states is that cost payrolls, in consider state. illustrate robust Hawaii. XX% compensation approved of Industry a loss Virginia the operations support variation underwriting service industries, State continue in increases latest business. costs, influence state is of can impactful. the state-regulated I influence pandemic-specific to To that their increase approved Two Unemployment rights and stay-at-home important where distinction or and and impacted there and costs mandates essential businesses mix are factors

we competition the actively For in market, remained robust the third quarter. states

ELCM Our competition. to is response one AMERISAFE's measure of

for quarter costs were loss XX.X%. X.X% was policy X%, in quarter healthy Loss was the from ELCM the down on primary count down in resulting third by the premiums The our of policies driver. the were cost only retention average. states quarter written our the supported Based third X.XX policy quarter Our XXXX. in on XX.X%. were of changes industries, for X.XX, and Voluntary down down

slightly. quarterly ability was during our pandemic to The to in policies quarter. business impacted Less quarters prior individual our payrolls were positive from premiums premiums new distribution due audit hampered New impacted revenue in network. which in suppressed written the also to the business, disruption the Payroll part robust prospect agents' quarter. independent

gross XXXX. premiums the the down than In our premium $X.X However, were adjustments third quarter. total, XX.X% other audit of and were lower written million quarter from

incurred. losses to Turning

third the quarter LAE down for Our quarter ratio was XX.X%, from slightly in of the loss XXXX.

at in remained Frequency XX.X% quarter claim accident ratio XXXX counts accident first current our were expectations reported down of of and trends year as the XXXX. with quarters loss the the the third year. for the favorable same and below Our of XX% full two year the XXXX quarter from

circle take go. However, on industries. model been particular to industry accident to current will for quarter. focuses this is of back have I opportunity given mix. operating timing severe one still year and any not to expectation, Severity low-frequency quarter AMERISAFE's has our within accidents the high-severity, to we The

extensive $X.X of year reserve claims $XX.X We Case management reach claim outcomes overall decrease favorable by loss basis favorable led or development ratio. $X.X XX.X favorable and of accident continue to to were accident accident development million our million development, favorable aided note $X.X point in million Accident year the and claims with development. attributable XXXX million prior counts. for year of with years to of changes lower with year to XXXX favorable XXXX

to call prepared remarks serving the over like shareholders. are metrics, value providing I'll founded our We to our commitment turn turn Neal and call conclude the now our to to to my ability I quality our dedicated of to Earnings reiterating long-term in stakeholders. by pay our to product Before remain Neal. expenses I discipline insurance would and over cycle. insurance other to dividends throughout the strong mission underwriting while discuss financial profitably

Neal Fuller

everyone. good you, Thank morning, and Janelle,

$X.XX of per or for year's last $XX.X year's earned million XXXX. net quarter. share third X.X% Net For million income with when income million X.X% or per quarter $X.XX to $XX.X of $XX.X net $X.XX the quarter of premiums the quarter or share quarter. diluted compared XXXX the in compared to an in third the quarter to diluted reported third third of $XX.X in Revenues was decreased Operating the with $XX million from increase third decreased million per $X.XX of share, or third $XX.X AMERISAFE XXXX. compared million quarter last

of treasuries average in X% equity end. overall amortized bonds now and $XX.X XX% in XX% bonds, gain up year's municipal not our point driven income, by of bond quarter the portfolio pre-tax interest quarter and portfolio. in Net was were in bonds one remains an million Turning other agencies, the XX% to investment yield securities $X.X third investment XX quarter, at particularly portfolio X.XX yield at year decreased comprised Last third ago. cost, fixed X.X% value AA position $X.X investment the the the down decrease in investment reflected income the and investments. a X.XX% the tax-equivalent significant There unrealized portfolio. credit our Approximately portfolio quarter rate portfolio the gains which make XX% of realized net high-quality, in The the is was for basis unrealized which in less and in X.XX% XXXX. portfolio end are cash The X% of allowance to high with taxable with lower the was million an of XX.X% income in and of in at are during our from third cash our and or The held-to-maturities on municipal points investment for with bonds, carried municipal the of was bonds, duration securities, securities, XX% XX% at U.S. the a These on were compared quarter. no end quarter. million securities. on credit as losses of third gains book quarter losses. on carrying a includes rating for short-term The investment corporate

operating to now Moving expenses.

category, By in of early and of commissions other a trust termination quarter assessments of million expenses XXXX million salary quarter costs. expenses due Our loss $X.X an $X due quarter $X.X to the a related third in in assessment fund. reduction included total underwriting the $XX.X other compared benefits, XXXX. million multiple The million in in were to decrease underwriting state third $XX.X with the and the $X.X million was and to of injury and million expenses

benefit, change a the the assessments the ratio expense was have compared of As quarter assessments, the Without the for in XXXX. in been XX.X% expense the XX.X% for third quarter the change quarter result expense with would ratio our and XX.X%. in of associated

year's Return third quarter. of quarter was the XXXX. to is the Operating quarter Our investment equity XX.X% of for on was for ROE due last the XX.X% for XX.X% income on more compared This quarter for largely quarter to last our XXXX portfolio third than third to tax the also compared year. tax-exempt for rate XX.X% was XX.X%.

Now earnings dividends of XX, November share paid per $XX.XX the This announced our turning Board with Directors XXXX. of shareholders release, record per total in eight in $X.XX share. November declared a management. amount years of conjunction as to payable to the XX, capital the last brings special And company's of as XXXX, to on dividend of for out special shareholders

finally, XX, December share other regular a of of Board per XXXX. at record payable December Directors a at dividend value In $XX.XX, on XX, from of XXXX, Book share, addition, declared company's was $X.XX couple of just to of the X, And year-end. up September quarterly XX.X% $XX.XX as per XXXX, cash shareholders also items.

my our after was we million like special to the filing tomorrow session. That the for dividends this we would to remarks, be company dividend. to paid statutory the will up parent now amount XX-Q due Our lastly, quarter Form $XXX the surplus open question-and-answer was and up quarter end. at SEC market surplus Operator? The of call closes. with concludes for lower the And the

Operator

Truist. ahead. we'll Mark take Please from And [Operator Instructions] from our question first Hughes go

Mark Hughes

Neal. you. thank morning Okay, morning Janelle, good Good

Janelle Frost

Mark. morning, Good

Mark Hughes

the people year, from still claims? any claims the sharp are any claims, treatments? before, for think obviously those? year. impact that this deferring worked the -- Are a from claims the being Are year On on you you the in seeing there is drop benefit on about older COVID When last

Janelle Frost

pandemic, in just surgeries. Early Mark, country deferred question. on in great saw, a Yes. like saw, we certainly everyone the delays else the in appointments, that's

I to to regarding But claims. normal terms great procedures. think of a returned the in that more what question that's older has happens

the accident procedures this have of delayed, claims and ultimate there's accident lot those happens. medical what has current been out in still improvement care been a time been focus of we do concerns, delayed, for a decline on on been the the those frequency that But I Certainly, have maximum claims we've claims. as and have current about the we somehow does calls, about So year. that there, medical happens which open, alter But severity talked to prior year. have that the

I we've will eyes thus we're than inventories So, far claim say keeping that lower on. XXXX had we it's expected. in less our something

claim most of And years. so acceleration some for we've rates accident older in seen certainly our the closure

Mark Hughes

impediments closed, little of to harder those any it judicial the to you old that there competitors a from off your make talked a might have that? administrative getting like the sign or claims? what courts some see anything are Do judges out Is or that? administrative If of close about one you

Janelle Frost

was that the it took bodies pandemic Certainly -- to while a case. it get the indeed again, early but Yes. those certainly to regulatory they on in adjust, done. states and But ways found

So I back I is that mean, track. of again, think there delay. was a on most But

Mark Hughes

Okay.

X.XX Your the is -- that? it pretty similar yes, competitive we you to Is the Could environment stabilizing? X.XX. had. what assume was XXXX

Janelle Frost

is lots heard among what's still we've of going drive carriers out increases there. comp in of There's talk to It competitive workers' rates.

I been few there think rates. articles about out put increases there's a in

I think that's very state-specific and industry-specific.

space not in it's people you we and there, business, sackers irrational very books we So, the prior where industries It's alive competition and well. were soft and that certainly in the it's of competitive. we I that competition from very, but tell spoke write, of buying market can is actively just that

Mark Hughes

the distribution, mentioned things up is had back in in new normal -- or air? prospecting to And there in that that. was that like the for some disruption Is still you accounts, the

Janelle Frost

and was It's certainly pandemic agency the When It's think orders agents. certainly you the for distribution, an stay-at-home remote about I improving. and feel them. it work obstacle and for improving.

it certainly was new with for stay-at-home to difficult them So orders business. prospect very

new about working business out. But think typically XX days agents they their renewals. were work So, prospecting that you on and

business So, we were in pandemic, flow as stay-at-home early lingered. but good of on getting the pretty orders a submissions still new that dwindled

prospecting. been third think quarter have have typically would you those accounts and agents in would June out May about when been that specifically, So,

state and -- was know point. all so what of that at the we the And country

of it's it Labor do lot Anecdotally, think a improved. like reasons. off of different I people point for was a So, Day a seemed lot cut different for

started we later improvement the quarter. yes, in So seeing

Mark Hughes

And then one final question.

companies? it's busy, talked the job the kind for question everybody have has the to construction on continued how of updated be perspective that that Any job some. but about You is next for next construction,

Janelle Frost

Yes.

I lot. So uncertainty hear the a word

out A, a pandemic think I to the what's related going vaccines there's lot and of there. to and uncertainty happen.

to the election do think a a I The the uncertainty. lot uncertainty. has has to recession do with lot with the

postponement. in and say, yes, different haven't don't read. talk and uncertainty But you to heard, I going papers people keep when absolutely is to in make a willing the articles hearing it yes, I people keep, that different I anecdotal than this just I more different read So, I hear call the not and we're expenditure. that can are again, capital word postponed. think industry, to day and trends

I mix working. there But uncertainty think are it they out there's just clientele, kudos keep to the to still enough postponement. just of in our

Mark Hughes

you. good, Very thank

Janelle Frost

you, Thank Mark.

Neal Fuller

Thanks, Mark.

Operator

missed by from We'll take the now Riley. in frequency. Randy guess could you you lower the In in the - I about know of quarter? ahead. Randy that think Please actual next But our percentage Hey, I I've repeat -- Mark's I conversation. good from Q talked question Binner Binner go B. kind was questions there, morning. it I

Janelle Frost

down. was you Is what that frequency to? The that were referring percentage

Randy Binner

Yes.

Janelle Frost

Yes.

accident our in XXXX. claims year, reported XX%, quarter for So, year for the we accident down the were

Randy Binner

Yes, of I ratio, And second or as then, for a expense injury the trust, just multi injury the the you. year. on Got accident guess, termination fund.

terminations? I are follow-on be, of that's generally question might results, funds such kind there claim other discrete would it's have there the complete, the early But the that out of matter, to extent function think that right? a better meaning

Neal Fuller

actuarially they the Fund, $XXX I Yes. It's assessing of to that for much a years. ended million was last where Injury than This got point the was Subsequent really earlier the good a and scheduled. funds. the little question, Trust pretty bit assessment This they a Randy. about Georgia industry been the XX had they one year think And finally bigger

a had why had that's we we up that full accrual for one item. time and So, the

the there's there was many actually take Another We out fourth toward assessing funds had up. then in that typically in was quarter, fund too benefit. similar the a have But And year not been still that industry Carolina. assessments down are like we it event that was conservative last a and this. the this, loss-based this that shut them other one-time view put those like and a South

Randy Binner

then And tax just understood. the Okay, on rate.

year. You little slower I had in been a expected. think you've And tax past all lower kind of or a been But little the rate at than have earnings shown profitability. good bit the bit a guess true-up the of I has good years there's where end

the the this wondering same year. so I'm might if that be And quarter? dynamic In fourth

Neal Fuller

for when try the year provision. doing we our to Yes, No. Yes. quarterly forecast net income full

that the a forecasted it rate. typically, year. tends is is that our we really big the don't lower quarter. see see other around to why in a is than I fourth that know The And expense true-up fourth the as we So do in assessments. see quarter that's typically quarters true-up in the we ratio be during in And quarter

Mark Hughes

that Okay, you. Thank works.

Neal Fuller

Randolph? Thanks.

Operator

we'll Securities. And [Operator question JMP from Instructions] take now next Matt Carletti go our from ahead. Please

Matt Carletti

in the actually often for while I'll Neal, kind QX quarter. Randy a follow-up of in now when On you Ok and a your for a expenses start where just morning. on off with question thanks. activity off about is the time comment these kind QX? provision then process left maybe Good we an right down. the potential little and happened from that of as it that? Georgia is happen, place that bit what they assessments, Should of if a thing takes this of normal don't kind pull bring Or quarter of that forward independent in a view

Neal Fuller

independent loss-based Yes, assessment, wasn't good thing. question. to that And seasonality. a it's subject it an a It's that was

Matt Carletti

then, And I little Got helpful. commentary bit? you gave. we it, just investments -- very perfect. appreciate talk about can That's And the a

to dollars Just they of as feel where get is the the like versus roll money today? for better book yield a reinvesting where yield curious Just you're currently? off trying kind new what --

Neal Fuller

than tough. yield rolling a been new quite portfolio. money That's bit the of is The lower what's been off

it in and timeframe. particularly on interest the hit We of interest the a cash more And short-term have reduction seen an we that, use to terms I that roll federal dividends would stabilize then with in gradually down. a -- particularly a other X should though, couple unfavorable the also, seen And we've pretty year-over-year for continue is purposes in expect quarters a X-year and big being with for in that decline significant where lower rates, then will have that basis. because it is that we comparison. rates that

Matt Carletti

the looks maybe for obviously, industry. And know, around probably, seeing we helpful. certain question your matter. your a not -- and aggregate looks how book states different a or it that's in apparent Okay, bad in really might good, parts account you're your the Is us number? bit size, I Janelle. do you be and commentary Can you how appreciate of some that And than pricing mix -- kind what otherwise, it are size? give signs, by in of industries color

Janelle Frost

Yes. really That's good a question.

we For say I And large that would of size say, again, not XXX-plus, of have sense, when I those account. or claims policy That's we with be XX.X%. it's when where us. for but of the would where strong our most had And of a policy that larger our makes mentioned really was, this about XXX, probably for of policy quarter, most larger, and we that's sort those our competitive retention play of size, exception number -- think I most it right? the policies, that really

sweet spot that. is smaller Our than the policy size

Matt Carletti

it. got And Perfect. you, question. then, last Got

the kind of in I us count claims. claim kind given large think, You've past of of, the

$X How year versus year this the you whatever metric north defined is? that is this running think expectations, right of I last million. or as them versus year

Janelle Frost

at if And XX you or had those At over we last $X compare claims of quarter that, had end the of XX XX were like we think, claims. million. year, I the year-end that Yes. something that

as my never not in to said happen still and unusual with but remarks, about certainly And certainly within So that quarter it's opening go. quarter going to I know which a nothing in, we expectations. it's

Matt Carletti

Yes.

remember week the last year of where we you think all I years get surprised.

you forward. hopefully, So case. you. that not the for good color. Thank Thank luck Best that's and

getting on feet America You that storm. guys, your to recent back for after

Janelle Frost

appreciate that. We Matt. you, Thank

Neal Fuller

Matt. Thanks,

Operator

take now Truist. next Mark our we'll And ahead. question from from Hughes go Please

Mark Hughes

Just have time's a others? some claims. know pretty you volatile phenomenon through in frequency on this to with you steady see see report down? frequency about it smaller accounts payroll some likely as Do even question. construction the think opposed consistently maybe with you that follow-up areas working to in Do are quick them there's been more your of less period? I people When

you're Just more where any why great. be seeing granularity on any issues seeing mix it, you're would

Janelle Frost

The the insight Yes. claim clear that one the particular why in as happen, the we XX% wish part I mix, they're Mark, of into was down is doesn't that reporting counts quarter question, -- excellent board. to why across why working, point why our when your -- something about had I are insureds are lower us. industry an in payrolls this is To it

not it what I are only to So about was can thoughts of certain particular group you is like tell my it. industry. or my what and a it speculation was type

I now. talk workers that speculating, And know this right workers speculate a speculate, the industries up have tend think hard-and-fast I data, conscious our our about of are that we we we more have at often more safety, not be surroundings, to conscious I insureds different in frequency. we're probably that I drive pace. maybe are working newer fewer again I is we new working, Janelle of insureds working. our think and and I believe may we're

now right steady they're think as not staff. adding I go, you it's

It's to for certainly why doesn't lower that's to me claim happening, counts. maybe So something the hard measure it's happen. but contributing

Mark Hughes

not it in wouldn't that claims your I you are reported. would And be correct? guess low severity being Otherwise it the see numbers, severity wouldn't, that

Janelle Frost

a Right, that's good right, it's point. very

Mark Hughes

you. alright. Okay, Thank

Janelle Frost

Mark. you, Thank

Neal Fuller

Mark. Thanks,

Operator

And question-and-answer turn further remarks. to questions. or That would to back we the does have additional call session. our over for conclude I any no like now Janelle closing

Janelle Frost

for all like beloved mission. a reminder stay family. you Southwest you our of from hurricanes your speak as dedication is to Thank of great Louisiana. country the you. to and serve There's Thank It commitment across the to employees of two Stay our nothing to to a pandemic and our global the safe well. today AMERISAFE

Operator

with call. may Thank And today’s now does that that for conclude disconnect. participation, you you your

AMERISAFE (AMSF) 31 Oct 202020 Q3 Earnings call transcript