AMSF - Earnings call transcript Q4 2020

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Operator

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

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. website

if be may Other Form are uncertainties a 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

we and health economic as The crisis, spirit and shutdown. of an disasters compensation a use back natural XXXX. I was unrest, the tested forced my work workers’ It differently. pleasure emphasis and on Kathryn, presented during the with The were to this global us year everyone. human social strength you, at competitive a market, Thank to and call back morning, interact divisions, looking words is good political

begun. decline payrolls approved decline. XXXX unemployment time, just If factors X the insured reported keep accurate, At the percentage anticipated only is COVID-XX Taking third certain competition the of compensation significant account has XXXX, the the industry’s property XXXX. NCCI non-COVID-XX of in costs Looking estimate This quarter. many back will drop deterioration of in same experienced ratio the continued and industry, will point increased. for through on robust to The the of as then impact line. industry a casualty analysis the a combined at was there profitable remain dramatically loss a The industry claims. sectors workers’ in in

The back place on management. challenges our much successfully insurers through high-hazard for we and dedication claims strong AMERISAFE, discipline taking foundation the to built in work we during of deemed pandemic were and underwriting work year’s of the and XXXX met impacted less service the at years employees’ essential our over focus outdoors. the Looking sectors with

impactful our As to to the a was the due industry to result, book. unemployment less impact

periods impacted positive in the remained by included For positive, and AMERISAFE, premium audit pandemic. quarter this the

However, fourth $X.X line fourth decreased than by was of premium Thus, audit quarter. million robust XXXX comparison. premium, adjustments, top with in quarter less the other combined prior audit year’s

quarter sectors economic loss aligned for premium we this be decrease written This with Also, down XXXX, forward averaging Looking policies decreases, X.X%. at into the in was component to premium. cost recovery the of insure impactful X.X%. will in

renewal. Cost strong declining for policies XXXX. this illustrates flat, the was for the down I which in we those XX.X% rate Our offered account quarter disciplined retention X.XX from while remaining relatively to ELCM of in X.XX, fourth our ELCM commitment with drop a believe for remain was a quarter environment. in of competitive

new hampered work policy prospecting to continue and disruptions business as pandemic-related count agent We with our growth. network

these During to of states of expansion help at like growth. also implemented achieve prior our year look quarter. county Altogether, premiums premium for XXXX, goal resulted in AMERISAFE, policy to and filed tiers pricing elements reported decreasing from the various back Continuing saw we additional the written XXXX, gross claims. XX.X% industry, some in fewer

our impact being low and frequency, tends known. system high-severity strain to on However, the the far the niche claim claims. toward due from healthcare severity ultimate The to pandemic is

a our ratio current accident loss fourth the we in not year did XX.X% As change result, of quarter.

XXXX, accident of from development points resulted XX case favorable losses million, incurred. significant prior had through $XX.X in which years also basis We XXXX favorable or year

case recent of accident across we be including positively years. accident favorable We surprised the to see years, by our development continue reserve more amount the

X.X we I to XXXX, metrics. will XXXX. XXXX percentage call forward point now discuss year investments, over be Neal initial to look down XX%, accident from will for capital to turn our As and the financial pick other expenses,

Neal Fuller

Janelle. Good everyone. Thank morning, you,

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

to the compared of million year X.X% $XX.X to produced $X.XX quarter. last decreased fourth $X.XX Net for Revenues challenges net share, year unique were fourth million in Operating last million, compared XXXX. down of full the quarter $XX.X income to from of AMERISAFE income million earned share. premiums with year’s the and XXXX, the per considerable net full XXXX X% $XX.X the or year quarter XXXX. per when For or despite down just $XX.X was million, $X.X

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

portfolio equivalent on comprised bonds, gains our down tax yield Approximately, Net The yields, million due continuation fourth in a reflected short-term for is million book investment unrealized income compared the or impact a compared with net XX% the our of is to $XX.X interest as down saw with XX% no quarter composed net bond in of in portfolio investment or rate XXXX, quality, average and we income investments, in which to X.XX, quarter year overall losses U.S. portfolio significant in full the $XX.X during income our of XX% corporate held-to-maturity realized to to an million million equities, was of gain in lower X% bonds, were treasuries million before agencies, are current lower the value with the the in and losses full XXXX. portfolio $X.X securities $X.X the $X.X the full the held equity net fourth Turning at X.XX% investment investments. portfolio The rates. year year-end. investment year-end an year-end. at portfolio X.X% at The million X% almost of portfolio environment. quarter carried amortized X% again the These municipal carrying short-term bonds Unrealized in XXXX. municipal of $X the the the the for yield end year-end pretax the on our in of raising contributed X.XX%. at year. was the securities is the rates XXXX. securities, gains was position of are on XXXX identical high were cash in rates any of are There or on significant were duration full at gains not the during year million and including in XX% XX% rating Federal bonds, in These credit on $XX.X There to for in of no quarter and cost. began quarter of Reserve and AA to with the taxable

of $XX.X expenses, operating to million was primarily our compared quarter due By with the now Moving $X.X and of in multiple category, total million million expenses fourth year’s and other of expense were end injury and in due XXXX benefits, last the salaries other increase XXXX. to operating The of fourth million the quarter underwriting $XX.X assessment. the quarter expenses commissions, the to and a in of million quarter underwriting included costs. $X.X expenses in $X.X benefit fourth million $X.X fund

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

of million, Recall termination fund the in a X.X%. or decreased operating a the that, year result third For subsequent $X.X expense injury XXXX, we quarter, assessment. the a full $X.X recognized as million benefit of expenses

for the previously, our Without have ratio full expense expense for year mentioned the XX.X%. result, was benefit as would ratio the year, expense Our a been full XX.X%.

the Our investment the of proportion both tax for rate XXXX. than XX.X% of fourth XX% XXXX quarter in quarter fourth on full equity higher of for our for a as the quarter average XX% was to year, and XX.X% compared XXXX income the for fourth on portfolio. Return a lower of tax-exempt result was interest

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

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

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

Operator

We question Thank Instructions] Carletti. and from you. go our Please ahead [Operator ahead. Matt first can take go

Matt Carletti

Good morning. Hey, thanks.

Janelle Frost

morning, Good Matt.

Neal Fuller

morning, Matt. Good

Matt Carletti

what of while obviously, bit guidance to little was Janelle, surveys that out mind landscape. ratio it and was still at in would whether in competitive, severity numbers favorable maybe When me mean happy you seeing little in are seeing? jump of comp. could loss kind looks hand too you keeping you seeing that it getting that, it’s like not for accident the the are in consistent to the frequency you are and least – maybe deeper very we be I landscape? year normalizing at otherwise, are with your look in trends I least some bit imply just into at things competitive of out What – a the a certainly or there, see it’s hoping

Janelle Frost

Yes.

about of would getting way of people I increases. rate a really state-focused. I very hopeful seeing can hasn’t I competitive. are your say Matt. say hand seeing reading not irrational there we not read is is competition, – you I seen much. that. or things seeing the some think have AMERISAFE still It’s it, have that to same not either. is I it’s been Competition changed do are think maybe very summarize too out probably good we terminology not But

depends it think that seeing groups elasticity. I you it’s for for same But are elasticity the a experiencing over on you underwriting, competition the have AMERISAFE, level we of still or if been hazard less year. more are

Matt Carletti

impact your comments if we about wanted that maybe the onion back get that. then dart or line like COVID-related headwind been X% might kind payrolls to bit XXXX? should even quantify or And of pricing of that as what you on number? understand more on otherwise, think be you have as of back there hopefully through you that other come appreciate could in a Great. little reopens, of just Can whether on the the at be anyway things And could tailwind was from normalize economy kind bit as in in help I kind I us or – a that the little what about of peel focus top versus exposure was of really, decline something voluntary can that the area I things pricing a premiums. as competitive the is just might thinking impacts throw it you ‘XX/XX

Janelle Frost

Yes, yes.

has it. to on insurers were whole you by not something delays us. We working. met I the still economic Janelle, But think you love about if question, that delay, were with as word about. and reporting I When think industries, is our the early construction, start were in So, of major payrolls industry great hear the postponed. construction as example. the with XXXX. part at we construction our pandemic I commercial Matt. in economy They speculation That for will a pleased a look It’s certainly,

my lumber. be construction no while could and do booming. bounce me term gives think impact construction And not that that some logging I back itself So, some is there – your to book insure – hope of that might we bounce question. in construction, all some I back that – happen in Residential residential see insure was line, and

So, we you and when of grew percentage X.X% lumber as actually X.X%. to the the is logging see our positive Matter a XXXX from industry. from trends book that saw published, fact, will in XX-K of

based So, things in that’s on in happening economy that ‘XX ‘XX. the strictly were and

and are Oil those there. happening positives us. gas, we know for So, all what’s

I imagine to delays some will Agriculture, bounce So, were of percentage fields. in to as the agricultural the will shrink book. pandemic there I have think some that continue a related back. Certainly, our

to in Let me think about trucking in across goods it’s great other a another of lot were as XXXX. Trucking trucking, example. seem regards. funny, lot maybe And there of a speculation as fluctuate being is doesn’t lines because some is another. obviously, this There much the moved of book country our

who to we small so of I insure, remind have myself employers. And midsized to

are carriers would these a XXXX than goods national moving in did across yes, see book. the seen in of country, we probably these that more probably boom So, our they have

resilient the up, XXXX I if would trucking were I think payrolls, Does expect carriers that address national again, your because economy – as say they as in question? don’t would carriers. picks I trucking to larger or even an in So increase our see hope

Matt Carletti

way a), to those I mean kind of for Yes. numbers? but quarter full of year. is that No, have guess, in if it’s them do maybe audit by versus just me kind all magnitude know them of the know a kind of that full I terms have about ‘XX think you full rough change way impact? I don’t I mean – give mean to we I numbers that is ‘XX? premium you in year about of I some helps. front a And the of reasonable the the a I way year it, wise, very about in think think of in

Janelle Frost

Yes.

and It I because a such everything for to it ‘XX think ‘XX year ‘XX Matt. ‘XX is, start reasons, interesting right. comparing just to of see is to unusual be will as we to XX number an

interesting it So, will to be see.

Here even remain the premiums, positive. point is audit XXXX, in our

what premium the policy period estimated of the the at was So, to in at positive. end was what the words, other policy period it we beginning originally the from of

‘XX. was not good that was sign for So robust us. That’s was it tremendous. It in as a as

guess farm, construction, pointing year-over-year can not lines. roofing, some saw saw declines imagine, trucking. of in construction. declines in So, economic – that we We logging that’s And to and – we saw the as there in even lumber declines I – why you in according is to I even though subset those saw we in we we capacity – was bounce think in but increases in pointing no roofing, was do to saw a for Janelle declines again in outlooks back but

Neal Fuller

Fuller. Matt. Hey, Neal This is

$X.X other million and give in positive million year audit and to XXXX adjustments, is positive Just were you those $XX.X this XXXX, $X.X numbers, positive in million in full XXXX.

Matt Carletti

Wonderful. and you really everybody on economic bottom color line what congrats for all very here. tough think Okay, I helpful. very results a outlook for and great. the the looking and That’s nice Thank

Janelle Frost

Thank you, Matt.

Operator

next go take [Operator and Instructions] Hughes. will We ahead. from question ahead Please go Mark our

Mark Hughes

Yes, thank you.

Janelle Frost

morning, Mark. Good

Mark Hughes

development. a when But the you to accident as XXXX, not with you question in whether that before frequency, about or meaningfully. Janelle, think start have to I about you frequency I is historically, books think XX understand the year take have evaluating said months you down XXXX, it’s want of

for? don’t are a IBNR whether you quickly have develop going lot if you And are or bit to of little not so those on presumably, will you if case as reserved losses not the you have know sitting reserves, a more

Janelle Frost

type our high write frequency, low severity. we industry Mark,

want frequency pandemic in is could the there XXXX, calendar comes is in all I important. mean because that where in frequency no say XXXX. denying XXXX, claims And what important. year reported not a to So basis. on don’t go-forward we the that happened is fewer question things Obviously, that us of with for with had mark particular the and is Severity

We we $X year We on XX end have have for calling claim of XX ‘XX claims, at ‘XX. over million. severe severe what been had claims accident calls these the

severity So slightly slightly be as severity we XXXX standpoint, severity expected up. from was to up, a have would

of how So strain happened we healthcare this your I and going on And other were years. do year lasting industry of to These of are impact of know have unknown, are me. going happens the the not do that open, the impacted basis, XXXX for know so because go-forward claims think how closed, I procedure, claims or of that’s our was what are in effects with mark to many be There XXXX point, don’t deployments question claims. going outcome severe XX% forward, remaining ultimately sooner the one-and-dones, a over to there Dodge for we because everything the I’m ones those the ended because a XX% those with. and claims, couple on experience, is so the think the over these still to are that I

cautious sooner I’m claims. able we than our in say severity based to to would be know that, our prior on So the of experience yes,

Mark Hughes

able possible, it Is XXXX likely it I firmer may possible. months, conclusions? that, at XX for you and assume Understood. that’s to be some draw look after more

Janelle Frost

yes. Well,

accident any more ages, year know As and we right? more,

Mark Hughes

Yes, yes.

this expense is Were the million, Okay. $XX.X And items low at quarter, there the something? it unusual it million? any was If the quarter. this was new normal? year then, in missing or Am seemed this the ratio, Neal, on $XX excluding pretty full I one-timers here,

Neal Fuller

were unusual there say would I items. No. some

run the because just professional not we going the us, typically, million down would lower compensation one-time recall obviously, that, $XX.X But upwards. in $XX.X million, expect forward, And hold The nature. for although the ratio accrue other fees the a and quarter. guide, full fourth year assess line because in tend expense for is we fourth come typically see premiums, may of expect to decreases in You most the with in decline did a quarter in commission expense the of if ratio I would But are we also try our trend also to throughout in going rate were those assessments then, quarters that expense, that than year. would that, these states bit the little in we expense, to quarter. look to expenses as we’ll

Mark Hughes

running I don’t dividends, point? And right that me. about sorry have they front I the then have am a been in of

Neal Fuller

dividends point. X the running X.X Yes, of and in been X ‘XX, about have the X.X third been quarter high last X there so between have points over the There a point quarters. have reached of

Mark Hughes

comment Yes. And numbers was loss terms of in I thank for Janelle, that the coming you NCCI? whole? think, the from costs. as been on kind that then, the, as have QX you any of could In lately they loss ones out decline those you in seeing been you’ve got in case, or X.X% what Was for year a cost

Janelle Frost

The question. good $X.X to was quoted fourth fourth quarter you quarter, of impact XXXX. million Yes, the I

quarter coming of recap, through X.X%. we’ve X.X%, costs been come So been we approved that first through then loss costs are – was sort we’ve to have – X.X%, the the been mid-single-digitish. X.X% and And seeing

on which see. talked we’re So decline, a anticipated, the the last We call. of and it happy looks to about slowing like this we’re think I seeing we

Mark Hughes

you the industry the you in think and as whole? that’s down meaningfully for out And a pointed I was frequency, of for face that which

Janelle Frost

XXXX if this It how into way, happened that be works in in rates, or works Yes. interesting that its way with will to anomaly frequency. its see it

Mark Hughes

Yes.

Janelle Frost

It’s great for case be study to a someone. going

Mark Hughes

much they pay to XXXX. that properly said attention remember I going to they weren’t

Janelle Frost

really Word there just to We a initial going out about pandemic But we’re that doesn’t things yes, That’s we numbers that’s still think know I right? it impacts seeing, the think Yes, yet. is and But to just my to have there you’re influential. be throw different – that not many is haven’t right. all understanding. yet, it of had seem understanding. are so don’t my

Mark Hughes

the had kind up, notional But meaningful for infrastructure think infrastructure in pushes, times has always where horizon. been that’s spending past over And business? you that your have if this of I ramps

Janelle Frost

it can be, of sort seems it when those it’s to because if around see cycle. come Yes, believe roads, it it but every particularly bridges election we things, we

Mark Hughes

Yes, exactly.

exposure, I Okay. And just formulation next ask is used you’ve but the that the important. your I – it’s that addressed job you then, you’ve think will about construction this,

said there feel the cancellations. you you about been haven’t think next do I job? What

Janelle Frost

we I people Yes. it pre being were We about economy does vaccines about better. on capital there bounce out commit the willing and think be better closer the there all precipice, back an to like dollars – to get the overall feel we those economic to the right, hinges is bounce and to because outlook feeling The people projects, we But on should optimism able pandemic. back.

don’t know hoping that back I going are So the think think if we’re I to opportunities opportunities the – all we but I we there. level, go are be to

Mark Hughes

precipice the the precipice. being Yes, good

Janelle Frost

have Yes, Good point, right. should exactly Mark. clarified. you’re I

Mark Hughes

you. Okay, thank

Neal Fuller

you. Thank

Operator

Alright.

We will ahead. go ahead Randy please Binner. our question go and take Randy, from next

Randy Binner

Thanks. morning. Hey. Good

Janelle Frost

Randy. Hi,

Neal Fuller

morning. Good

Randy Binner

switch. kind see going has commercial the reflected environment when lines that’s be to saying to But comp conversation, is going really some this I is writers don’t apologize I if I guess detail of putting the soft, of at one – because look of about, of in late, are have there inflection has of right, listen which season, if been Mark firm, And the think valuation in question, of and why my everyone workers’ so would is pricing, you came Matt and been earnings talking earlier the you this to because bigger I question ELCM. AMERISAFE. the together and this kind and then, in share did is is I work performance I kind what comp work rate guess the just I I comp whole frankly,

you price like ought but – guess, any So the this doesn’t no notion real it numbers to ELCM there all; to is just happen, because, is frankly, evidence. would I I of hear but it from there of seem on kind question, just is commentary turn? love

Janelle Frost

answer we’re that’s to at of To about first, your quarter XXXX, X.XX inflection. It in and with all look It fourth prolonged ELCM very is to going X.XX nice economic a unknowns. And Yes, about XXXX there lot an it. for of happen what has the reading say going a It impact. I’ll of rates, versus been fourth way market. quarter what’s question, a has some an payroll We’ve this the has impact, to XXXX It then, livelihood be right. sectors happens. soft impact. just what adds

the think not as we’ve up been think we It about workers’ is – business, regulated. classes very comp much Main I comp things going So to one reading, working we I and is hazardous all. its Street really have size state which services, workers’ keep fits back more then to whole, hospitality, includes and that to underwrite. way And a the

pricing So rate mean environment same environment, environment does state. in a one not rate in state a pricing another environment,

of again, you and businesses I because competitive said So book in still of are of differently things those carriers, increases that severity. a lot it’s I AMERISAFE’s I different carrier rate think maybe read to can I approved and where write see feeling in business, are only seeing hospitality point, to I underwrite. wide larger articles, think, very loss even can coming declines. costs swath these increases. Obviously, environment, speak the AMERISAFE’s classes – business and types whose is you in again are I and when very, for your write there. think in opportunity another not these that not that a high competitive we’re very low frequency, of I It’s about But the still we the rate certainly factors.

profit very from, is that’s where what different margin from, business and coming a write you a are losses and happens at that’s where animal right. AMERISAFE, coming your incurred If your frequency-oriented, is that that’s than totally

I tremendous going differently in Does granted. and rate So about to sense in bounce to make an was it’s the anomaly, about that think it But that’s I you? Hopefully, for think drop think frequency and them. back, XXXX, and wonderful rate. than they this that had they

Randy Binner

worker’s Yes. whole a No, comp, cycles. it I claims, on But that be turns that’s and across lack seems just of to does. pain guess, of spectrum what there

keeps mean so you’re kind don’t much just you look use from if and you comp, I special the have with price, capital, so I but mean, for buying happening to another what deploy in how the way – capital keeps excess book take I of you an dividends not right? ever waiting right happening. love for worker’s would all are great. of franchise the And business mean any your more to at But capital a mean, these at know opportunity is you’re I other distressed your you capital of kind not right there And or it a perspective? that

Janelle Frost

ways, been because are diligently they what underwriting. but me working of kind And are sort hindsight. course, agent soft market I to soft think profitable with of disciplined our that ways we to well, in I let network costs we think can we write maintain policy business, because, policy like We there to to and working – We do have of tell ability growth. okay, loss of, happen are. hit in the costs important and trying do really so in find that this feel is XXXX make loss now count you, count for terms even ways I are think us. – find diligently Yes. I mantra in of get took this as said comments market a our That’s our to throughout opening grow are the

been look You has the been profitable. and back, has AMERISAFE profitable, industry

yet. So the opportunity is the there. I agree seen with industry you about hasn’t pain the

wow going to what the already assume be that’s based see by while last not are about, is has we like yet, factor going years, indicated, up over So been couple to think interesting of incrementally, XXXX, there. the the the on it I That’s combined coming when of impact the you’re XXXX think pain, see, what NCCI going right? will I talking industry, well. ratio I development. it’s happening assume what getting is, And as for adverse I in forward? they is that incrementally pain point. it I percentage of – think it is a to see pain,

some So see I where optimism. can there is

Randy Binner

Looks Alright. the quarter. Thanks. appreciate I a comments. great really

Janelle Frost

Thank you, Randy.

Neal Fuller

Thank you, Randy.

Operator

Alright. It the like appears remarks. or for conference to additional Frost, closing there Ms. I’d to at are no this any questions further time. you back turn

Janelle Frost

I over. the some continued XXXX pandemic XXXX. The you. Thank recognize challenges into not from is of

of We’re by still lessons economy so us an for are because workers’ people, you I forward an Nevertheless, recovered. today. learned the year. remarkable do part with XXXX. market. The compensation has Thank in a I’m financials, in and joining foundation strong now looking not supported over soft can a unprecedented we organization

Operator

does conclude today’s participation. all conference. for Thank This your you

You may now disconnect.

AMERISAFE (AMSF) 28 Feb 212020 Q4 Earnings call transcript